Explore commonly used personal finance terms.
An adjustable rate, also known as a variable rate, is a loan or investment interest rate that fluctuates over time based on a benchmark, such as LIBOR or a Treasury rate. Adjustable rates are common in mortgages and loans, where the rate may change after an initial fixed period. This structure provides lower initial rates but can result in higher payments if rates increase, posing potential risks for borrowers. Adjustable rates are beneficial in low-interest environments but require monitoring as market conditions change.
