Are Personal Loans Fixed or Variable?

Personal loans are available with both fixed and variable interest rates, but fixed-rate personal loans are more common.

If you're looking for stability, a fixed personal loan locks in your interest rate so your payments never change. But if you're open to risk and potential rewards, a variable rate personal loan starts with a lower interest rate but can fluctuate over time.

Concerned about your credit? Knowledge is power! Join MoneyLion and monitor your credit for free. 

Join Now and Monitor Your Credit with MoneyLion!

Are Personal Loans Fixed or Variable? The Short Answer

You can find personal loans with both fixed and variable interest rates. If you're not sure which is the better option, here are some quick facts:

• A fixed-rate personal loan offers predictable monthly payments that won't change over time.

• Variable-rate loans often start with lower APRs, but they can change at any time based on an index like the Fed prime rate.

• If you have more flexibility in your budget, you might be open to a variable-rate loan, since you'll have to adjust to payments going up or down.

• Most personal loans have fixed rates, where what you see when you apply is what you get for the life of the loan.

Fixed vs. Variable Personal Loans: What's the Difference?

The biggest difference between fixed and variable personal loans is their APR, or annual percentage rate, the yearly interest rate you'll pay to borrow money including any fees such as origination fees.

Fixed-Rate Personal Loans

With a fixed-rate personal loan, your APR stays the same from day one until you pay the loan off. That means your monthly payment amount will never change.

Unsecured personal loans, which don't require collateral such as a car or a bank account, usually come with fixed APRs. Having predictable monthly payments makes it easier to incorporate a loan into your budget, since you won't have to anticipate your installment amounts going up or down.

How Variable APR Actually Works

Variable rates on personal loans are often tied to the prime rate. The prime rate is based on the federal funds rate, which is set by the Federal Reserve at meetings held every six weeks based on the health of the current economy. 

While the Fed sets the federal funds rate, financial institutions set the prime rate to determine how much they'll charge customers for loans, and it’s usually about 3% higher than the federal funds rate. Lenders usually add a margin of at least a few percentage points on top of the prime rate when they offer customers products like personal loans, mortgages and home equity lines of credit.

Based on fluctuations on the federal funds rate, as the prime rate moves up or down, your loan's variable interest rate can also change. When that happens, the lender will recalculate your monthly payment based on this rate change as well as your particular loan details: how much you still owe and the remaining length of your loan. 

Here's a quick comparison of what rate changes mean for your variable-rate loan payment:

Fixed or Variable Personal Loans: Which Costs More Over Time?

Here’s a quick overview of the differences between fixed-rate and variable-rate personal loans that can make one option more expensive than the other over time.

Say you're borrowing $10,000 with a term of 36 months. Here's how that could play out cost-wise with a fixed-rate loan vs a variable-rate loan. 

With the fixed-APR option, your rate is set at 12% APR and will stay there for the next 36 months. That would translate to:

• Monthly payment: $332.14

• Total interest paid $1,957.15

• Total cost: $11,957.15

If you go with a variable rate, your APR will probably start lower, let's say at 9%. But maybe that rate increases by two percentage points after the first year, bringing the APR to 11%, and it stays at that rate for the rest of the loan term. 

Here’s what your payments and interest would look like:

• Year 1 monthly payment: $318

• Year 1 total interest paid: $776.66

• Years 2 to 3 monthly payment: $324.42

• Years 2 to 3 total interest paid: $825.46

• Total interest paid across life of loan: $1,602.12

• Total cost: $11,602.12

This shows that you can end up paying less in total interest with a variable-rate loan — $355.03 less, in this example. But if the APR increase was more dramatic or happened multiple times, the math could favor the fixed-rate option. 

Need to compare personal loans? MoneyLion can match you with loan offers up to $50,000 from our top providers. Compare rates, terms, and fees all in one place.

Should You Choose Fixed or Variable?

Not sure which one is right for you? Keep in mind that your options will depend on what you qualify for based on your credit history and financial profile. If you have access to both, here's how to think about which one fits your situation best.

When a Fixed-Rate Personal Loan Makes More Sense

Fixed-rate personal loans can be a better fit for these scenarios:

• You have a tight budget, need a set monthly payment and don't want to risk unpredictable payment increases.

• You're consolidating multiple debts into one loan and want a single, predictable monthly payment rather than juggling variable costs.

• A borrower with a large loan to be paid off over several years who worries that a variable-rate loan could adjust many times over that period

• A first-time borrower who prefers simplicity over the opportunity to save on interest if the variable rate happens to trend down

When a Variable-Rate Personal Loan Makes More Sense

As for variable-rate loans, they may be a stronger choice for the following:

• A borrower with a shorter loan term, such as one to two years

• Someone with flexibility in their budget so they can handle increased payments if rates move up.

• A borrower who feels confident that rates will decline based on recent economic data — and is able to afford increased payments if they go in the other direction.

FAQs

Do most personal loans use fixed APRs?

Yes, most personal loans use fixed APRs rather than variable APRs. It's possible to find personal loans with variable rates, but they're just less common.

How often can variable rates adjust?

Variable rates on personal loans can adjust monthly or annually, depending on the particular lender. They'll spell out how often rates can be adjusted in your loan agreement. 

Can you refinance from variable to fixed?

Yes, you can refinance from a variable-rate loan to a fixed-rate loan. If you have a variable-rate personal loan and your rate keeps increasing, applying for a new fixed-rate loan to pay off the variable-rate loan could make sense to keep your costs down, but you'll want to factor in extra fees, such as an origination charge, for opening the new loan.

Can a fixed APR ever change after approval?

A fixed APR on a personal loan usually can't change after you've been approved. This would generally only happen if you refinance your loan. 

Stephen Milioti contributed to the reporting for this article.

Sources:

• Consumer Financial Protection Bureau (CFPB). "Understand the different kinds of loans available."

• Capital One. 2025. "What is APR and how does it work?"

• Federal Reserve. "What is the prime rate, and does the Federal Reserve set the prime rate?"

• Federal Reserve Bank of New York. "Secured Overnight Financing Rate Data."

• CFPB. "Comment for 1026.30 - Limitation on Rates."

• Numerica. "Variable-rate vs. fixed-rate loans."

• Citizens Bank. "What is the prime rate — and how it impacts you."