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Let’s begin by looking at the difference between the two.
Fixed vs. Variable Interest Rate
A fixed interest rate loan has a set interest rate throughout the life of the loan and may provide a sense of predictability because you know how much you'll pay each month.
With a variable rate loan, the interest rate can fluctuate. Most lenders base their variable rate on the LIBOR index, which works as a benchmark rate for banks internationally. If you have a variable interest loan, you may want to pay attention to how LIBOR fluctuates so you can better plan for increases (or decreases) in your rate.
Which Type of Interest Rate Should I Use?
If you’re looking for stability, you may want to refinance your medical student debt with a fixed interest rate. With a fixed interest rate, your payment amount will remain the same each month so you don’t have to worry about an increase in your bill if interest rates rise.
However, it’s important to note that sometimes an interest rate on a fixed loan can be higher than the interest on a variable rate loan.
A variable rate may be suitable for you if you have a regular monthly income and are confident about your ability to make the loan payments regardless of the fluctuations in the interest rates. An advantage when you refinance your loan with a variable rate is that you may be able to secure a rate lower than the fixed interest rate.
Other Factors to Consider When Refinancing
It’s important to do your research and consider all factors before refinancing your medical student loans.
For example, fixed vs. variable interest rate is only one factor to consider when looking to refinance your loan. Other aspects to look into include origination fees and prepayment penalties. Therefore, you may want to shop around before making a decision.
LinkCapital focuses on the unique needs and career stages of medical professionals. If you’d like to learn more about the fixed vs. variable interest rates, as well as better understand what’s involved in consolidating or refinancing your medical student loans, give us a call at (844) 226-LINK (5465).
We’re here to help you make better decisions when it comes to managing your student debt.