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Are Payday Loans Fixed or Variable?



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Payday loans are short-term loans and are of small amounts, usually less than 500$. They have to be repaid with the next paycheck of the borrower. The person who wants to take a payday loan only needs to have a bank, income, and identification. Mostly those people take these loans who have nonexistent or bad credit.

Financial experts suggest alternative lending sources instead of payday loans, primarily if the borrower cannot repay the loan earlier. Check loans NZ for more information on loan tips.

How to Take a Payday Loan?

The payday loan lender confirms checking account information and income and then delivers cash. According to the Consumer Financial Protection Bureau regulations, the cost of these loans from a payday lender is generally $10 to $30 for each $100 that is borrowed.

If the borrower cannot repay the entire loan on the first payday, some fee is added, repeating the process. Ultimately borrowers start owing interest more than the actual loan amount. Payday loans are considered risky because people get trapped in debts.

Are Payday Loans Variable or Fixed?

Payday loans are not variable. Such loans are fixed interest rate loans, meaning that the interest rate charged initially always remains the same.

What is the Difference Between Variable and Fixed Interest rates?

Before taking a payday or any other loan, it is imperative to know whether it has a fixed interest rate or variable interest rate.


In a fixed interest rate loan, interest is guaranteed to remain the same throughout loan repayment. The rate is specified at the start of taking out a loan, and you are asked to pay that amount only. So for the entire time, you will pay that amount of money, not more or less than that.

There are no fluctuations in the money you pay, even if something happens to the markets when you take a fixed-rate loan.

On the other hand, there are possibilities of changes in the amounts you pay in a loan with variable interest. These changes are based on the national market. Those borrowers who think that interest rates will decline prefer variable rate loans. Generally, variable rate loans possess lower interest rates compared to fixed-rate loans. But there is a risk for borrowers in that. Sometimes, higher interest rates increase the cost of borrowing. That is why those who opt for variable rate loans should be mindful of the potential for increased loan costs.

Uses of Variable and Fixed Rates for Loans:

Payday Loans

Payday loans are based on fixed rates of interest. The borrowers know from the start about the interest they will have to pay and how much it will cost them. Payday loans are not affected by changes in the market.

Personal Loans

Borrowers are more likely to choose a fixed rate loan when taking personal loans. The reason for this selection is the certainty and security of fixed-rate loans.


Mortgages are one of the most convenient types of loan. Generally, with a mortgage, the borrower can opt for both a variable rate of interest or a fixed rate. They can select the one which is right for them. This selection depends on whether they can afford the level of risk they are deciding to take or not.

Student Loans

The interest rate of student loans depends on the lenders. They have the right to decide whether they charge a variable interest rate with the loan or a fixed rate. It is advisable to go for the fixed interest rate student loan. The reason is that it has the certainty of acknowledging the exact cost you owe. You also know the time it will take you to pay off.

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