BANKING AFFAIRS

Detailed explanation-1: -What Is a Variable Interest Rate? A variable interest rate (sometimes called an “adjustable” or a “floating” rate) is an interest rate on a loan or security that fluctuates over time because it is based on an underlying benchmark interest rate or index that changes periodically.

Detailed explanation-2: -Variable Interest Rate Loans As a result, your payments will vary as well (as long as your payments are blended with principal and interest). You can find variable interest rates in mortgages, credit cards, personal loans, derivatives, and corporate bonds.

Detailed explanation-3: -The variable interest rate is pegged on a reference or benchmark rate such as the federal fund rate or London Interbank Offered Rate (LIBOR) plus a margin/spread determined by the lender.

Detailed explanation-4: -A variable-rate account is an account in which the interest rate may change after the account is opened, unless the institution contracts to give at least 30 calendar days’ advance written notice of rate decreases.

Detailed explanation-5: -Types of Interest Rates A variable interest rate is subject to change and is often pegged to an underlying index such as the one-year t-bill rate or, even more commonly, the LIBOR rate.