Variable Interest Rate

A variable interest rate is an interest rate on a loan or financial product that can change over time based on an underlying benchmark or index, such as the prime rate or the London Interbank Offered Rate (LIBOR). The rate can fluctuate due to economic factors or changes in market conditions, impacting the cost of borrowing for the consumer. While initial rates may be lower compared to fixed rates, variable interest rates carry the risk of increasing, which can raise monthly payments.