The difference between a fixed and variable-rate personal loan

When comparing personal loan options, one of the most common questions is: what is the difference between a fixed and variable loan? The answer comes down to how your interest rate is set.

Neither option is automatically better than the other. The right choice depends on your budget, financial goals and how much certainty you want over your repayments. In this guide, we'll explain how fixed and variable loans work, the benefits of each, and what to consider before making a decision.

What is a fixed-rate personal loan?

A fixed-rate loan is a loan where the interest rate stays the same throughout the agreed loan term. Because the rate doesn't change, your monthly repayments remain consistent, making it easier to budget and plan ahead.

For example, if you borrow a set amount and agree to a fixed interest rate for five years, that rate will remain unchanged during that period, regardless of socio-economic factors, such as changes to interest rates set by the European Central Bank. These changes often occur during periods of uncertainty, such as a cost of living crisis or during periods of economic downturn.

Benefits of a fixed-rate loan

A fixed-rate loan can offer several advantages:

• Predictable repayments that stay the same throughout the loan term.
• Easier budgeting, particularly for households managing multiple expenses.
• Protection from interest rate increases during the fixed period.
• Greater peace of mind because you know exactly what you'll repay each month.

For many families, consistency can make it easier to manage day-to-day finances and plan for future expenses such as home improvements, school costs or family holidays.

What is a variable-rate personal loan?

A variable-rate loan is a loan where the interest rate can change over time.

This means your repayments could increase if rates rise or decrease if rates fall. The lender typically adjusts rates in response to market conditions, funding costs or broader economic factors. Unlike a fixed-rate loan, there's less certainty around future repayment amounts.

Benefits of a variable-rate loan

Variable loans can also offer advantages, depending on your circumstances:

• Some borrowers value the flexibility that variable products can offer.
• Repayments may fall if rates move downward.

However, it's important to remember that repayment amounts can also rise if interest rates increase.

Fixed vs variable loans: the key differences

The main difference between fixed and variable loans is how interest rates behave over time.

For many borrowers, the decision often comes down to whether they value certainty or are comfortable with the possibility of changing repayments.

Is it better to have a fixed or variable loan?

There is no one-size-fits-all answer. A fixed-rate loan may suit you if:

• You prefer certainty over your monthly expenses
• You want predictable repayments.
• You are budgeting around family commitments and regular household costs.
• You value stability and want to know exactly what you'll pay each month.
• You value consistency and clarity when it comes to your finances.

A variable-rate loan may suit you if:

• You are comfortable with repayment fluctuations.
• You believe interest rates could fall during your loan term.
• You have flexibility within your monthly budget.
• You value the potential of future reductions in your monthly repayment amount, with the risk that they could also increase.

Ultimately, the best option is the one that aligns with your financial situation, goals and comfort level.

What should you consider when choosing a loan?

If you're managing a household budget, it's worth thinking beyond the interest rate alone.

Consider the following questions:

How important is repayment stability?

Many households find it easier to manage finances when repayment amounts don't change. If you have regular outgoings such as childcare, utility bills, insurance and mortgage payments, fixed repayments can make budgeting more straightforward.

Could your financial situation change?

Think about any major expenses or life events you expect during the loan term. Examples might include:

• Home improvement projects
• Buying a car
• Education related expenses
• Family holidays
• Changes in employment or working patterns
• Changes in any of life’s special moments (marriage, having a child etc.)

Understanding your future commitments may help you decide how much certainty you need from your loan repayments.

How comfortable are you with interest rate movements?

Some borrowers are comfortable with rates moving up and down over time. Others prefer the reassurance of knowing their repayments won't change unexpectedly. There is no right or wrong answer. It comes down to your personal preference and financial circumstances.

A practical example

Imagine two borrowers each take out the same loan amount over the same term. One chooses a fixed-rate loan and knows exactly what their monthly repayment will be throughout the term. The other chooses a variable-rate loan. Their repayment could stay the same for a period, fall if rates decrease, or increase if rates rise.

The total cost of borrowing may differ over time depending on how interest rates move. That's why understanding your appetite for certainty is just as important as comparing rates.

How can you compare loan options?

When comparing loans, it's helpful to look at:

• The interest rate.
• The monthly repayment amount.
• The total repayable amount over the loan term.
• How comfortably the repayments fit within your budget.
• Whether fixed or variable repayments better suit your needs.

If you're considering a personal loan, our guide on how to get a loan with Avant Money explains the application process and what you'll typically need to apply.

You can also explore our complete personal loans guide for more information about loan terms, borrowing considerations and repayment planning.

If you’re interested in a fixed-rate loan, Avant Money offers the best fixed-rate on Personal Loans over €30k*.

* Rates and loan terms are correct as of 27th August 2026 and are subject to change (Source: CCPC.ie, excluding green loans). Maximum APR (Annual Percentage Rate) is 19.9%. Minimum loan term is 12 months and maximum term is 120 months, loan terms vary depending on the purpose of the loan, terms greater than 84 months up to a maximum of 120 months are only available for refinance and home improvement loans of €20,000 to €75,000. Avant Money loans are only available to customers over the age of 18 and resident of Republic of Ireland. Lending Criteria, Terms and Conditions apply.

Representative example: On a €30,000 loan over 5 years, at a fixed-rate of 5.9% (6.1% APR) you will pay €578.59 a month. The total cost of credit would be €4,715.41 and the total amount repayable would be €34,715.41.

Bankinter S.A., trading as Avant Money, is authorised by the Banco de España in Spain and is regulated by the Central Bank of Ireland for consumer protection rules.