How Do Variable Interest Rates Work?

When choosing a loan, you’ll likely encounter both fixed and variable interest rates. If you’re new to these terms, here’s what they mean and the pros and cons of choosing either. We’ll also discuss how Study Loans’ interest rates are calculated.

Fixed vs. variable interest rates

A fixed interest rate is fairly simple; it’s a set rate which will remain the same for the entire lifetime of your loan (i.e. how long you have to repay).

Variable interest rates are slightly more complex but easy enough to understand. A variable interest rate can change over the lifetime of your loan. It has two parts – first the fixed margin which is assessed through your ability to repay the loan. This part is locked in at the time you accept your loan. Second, the interest rate index which uses international interest rate standards to set a fair rate – this is the part which goes up or down.

Pros and cons

Deciding between a fixed or variable interest rate for your loan is mostly personal preference. To help you compare, we’ve compiled some pros and cons for each type of rate.

Interest Rate Type Pros Cons
Fixed ·Your repayments will not change, making them easier to calculate and helping you to budget

·They can be better for long-term loans (10-20 years) as interest rate indexes can fluctuate heavily over such a long time

·Whenever interest rates go down, you’re locked into the same rate and your loan is, in comparison, more expensive
Variable ·Often start lower than fixed interest rates which means savings straight away

·A good fit for short-term loans (months, 1-2 years) as interest rate indexes fluctuate less over the short-term

·Variable interest rates that begin lower than fixed ones can increase to meet the fixed rate or sometimes exceed them


Study Loans interest rates

At Study Loans, we use competitive variable interest rates to offer the best deals to our students. We’re transparent about all fees so you can plan and budget for your loan payments each month. Our risk-based pricing model considers your financial situation, the interest rate index data and how long is left on your loan. Interest rates are calculated daily and charged monthly to ensure we’re always giving our students the best deal. Learn more about our interest rates and loans.

Helping to make education accessible for all Australians

Education is the gateway to so many opportunities, and at Study Loans we’re aiming to open those gates to as many students as possible. We’re Australia’s first private loans provider for education with a wide range of courses available to choose from. Try out our loan calculator to see what loan you may eligible for.

Study Loans Australia Pty Ltd (ABN 13 618 345 314) Australian credit licence 498589
whose registered office is at Level 5, 570 St Kilda Road, MELBOURNE VIC 3004.