Interest is a cost for borrowing money and is usually stated as a percentage. Different situations determine the type of interest to be paid. The interest rate applicable to a specific credit is outlined in the agreement signed with the original creditor.
- Fixed interest means the interest rate remains constant. If the contract specifies a 10% interest rate, it will apply until the debt is fully repaid.
- Variable interest means the interest rate fluctuates with market rates. If market rates rise, so does the variable interest rate, and vice versa. With variable interest, it's impossible to predict the total interest cost over the repayment period.