Once you've settled on a lender, there's usually one more decision to make: fixed or variable rate. It's a smaller decision than the loan itself, but it changes how predictable your repayments are for the life of the loan.
Fixed rate: certainty, locked in
A fixed rate stays exactly the same for the agreed term, regardless of what happens in the broader market. Your repayment amount is identical every month, which makes budgeting straightforward — handy if you're running a tight household or business budget and want zero surprises. The trade-off is that if interest rates fall during your term, you won't automatically benefit from that drop, and break costs can apply if you want to exit the loan early.
Variable rate: flexible, but less predictable
A variable rate can move up or down over the life of the loan, tracking broader interest rate movements. If rates fall, your repayments can fall with them — but if rates rise, so do your repayments. Some variable products also offer more flexibility around extra repayments or early payout without the fees that can apply to fixed loans, which can suit borrowers who expect to pay the loan down faster than scheduled.
"There's no universally correct answer — it comes down to how tightly your budget needs to be locked in."
Exodus FinanceWhich one suits you?
If predictable repayments and budget certainty matter more to you than chasing a potential rate drop, fixed is usually the more comfortable choice. If you can absorb some fluctuation and want the flexibility to pay the loan down faster without penalty, variable can work in your favour — particularly in a falling rate environment.
A middle path worth knowing about
Some lenders also offer split loans — part fixed, part variable — giving you a degree of certainty on part of the debt while still leaving room to benefit from rate movements on the rest. It's not offered everywhere, but worth asking about if you genuinely can't decide between the two.
There's no universally "correct" answer here — it comes down to your own risk tolerance and how tightly your budget needs to be locked in. We're happy to run through both scenarios with real numbers so you can see exactly what each option looks like before you decide.
Key takeaways
- Fixed rates lock in your repayment for budget certainty, but limit flexibility.
- Variable rates can move with the market, for better or worse.
- Variable loans often allow easier extra repayments without penalty.
- Split loans (part fixed, part variable) are worth asking about if you're torn.
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