PriceProtect™
DriveShield™
GarageGuard™
Services
Insurance
Car Insurance
Compare Car Insurance with Jerry
Jerry’s Expert Advice
Car Insurance Estimates
Home & Renters Insurance
Renters Insurance
Repairs
Car Repair Estimates
Repair Estimates for Popular Services
Advice
Read Car Content
Browse Jerry Car Advice
Check Out Expert Car QnA
Learn About How We Create Content
Jerry Data & Research
Which is the better choice for a car loan, a fixed interest rate or variable interest rate?
I know fixed-rate and variable-rate loans are available for things like mortgages, but when it comes to car loans, which is the better option?
Jim Donaher · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Generally speaking, fixed-rate auto loans are better for borrowers than variable-rate auto loans.
Variable-rate loans, as the name implies, can change periodically. The changes are tied to a benchmark, usually the U.S. prime rate. If it goes up, your loan’s interest rate (and monthly payment amount) goes up, too.
This type of loan may make sense if the interest rate is very low and the loan term is shorter than two years, or if you plan to aggressively pay off your loan before it becomes due. But with fluctuating interest rates, there’s also the risk that borrowers can end up upside-down on their car, meaning they owe more on the loan than their vehicle is worth.
With fixed-rate loans, the interest rate remains constant. This provides security since you’ll always know what your monthly payment amount will be. These types of loans are ideal for longer-term financing, especially if interest rates are volatile or expected to rise.
View full answer
- Gregory R.
WHY YOU CAN TRUST JERRY
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
Join 4M+ members in lowering their car insurance
You Might Also Be Interested
Read Advice From Car Experts At Jerry
What Others Are Asking
Browse More Content
Insurance in Your State
Easiest way to compare and buy car insurance
No long forms
No spam or unwanted phone calls
Quotes from top insurance companies