Do personal loans have variable interest rates?

Fixed-rate personal loans: The vast majority of marketplace personal loans are fixed-rate. Your APR is set at closing and never changes. This means your monthly payment is exactly the same for every month of the term, making budgeting straightforward. You know your total cost of borrowing at the moment you accept the loan.

Variable-rate personal loans: Some lenders (including SoFi and a few credit unions) offer personal loans with variable rates tied to a benchmark index (often SOFR - Secured Overnight Financing Rate, which replaced LIBOR). Variable rates usually start lower than fixed rates, which is their appeal. But as the benchmark index rises (as it did sharply in 2022-2023), your rate and payment can increase during repayment.

When a variable rate might make sense: If you plan to pay off the loan very quickly (under 12-18 months) and current rates are expected to fall, the starting-rate advantage of a variable loan may pay off. For longer terms, the rate uncertainty is harder to manage.

Fixed is generally better for personal loans: Unlike a mortgage where you might refinance or sell the property before the rate matters much, a personal loan is repaid over 2-5 years and you typically hold it to term. Locking in a known total cost via fixed rate eliminates the risk that rising rates add unexpected payment burden.

Verify before signing: Always confirm in your loan agreement whether the rate is fixed or variable. 'Fixed rate' must be stated explicitly. If a lender markets a low introductory rate, verify whether it adjusts after an initial period.