Variable Interest Rate

A variable rate is usually set as a benchmark rate (like prime) plus a margin, so as that benchmark moves, the loan’s rate and resulting payment move with it, which can work in a borrower’s favor when rates fall but adds uncertainty compared to a fixed rate.

Lines of credit and some SBA loans commonly use a variable rate structure, and understanding how often and by how much the rate can adjust is important before committing to variable-rate financing.