Calc of Fixed Rate

[asdfg]

Went into the bank for a loan and asked for the variable rate. Was advised by the loans officer to take the fixed rate option. (I hope to be in a position to pay off the loan shortly). Apparently the fixed rate option is the best to take in this situation provided the rates do not fall in the interim. If the rates rise you are locked in at the original rate.

I thought that once you took a fixed rate option you were tied into that rate for the full duration of the loan and you had to pay a penatly to repay the loan early.

Is the bank official correct?

 

[ClubMan]

Went into the bank for a loan and asked for the variable rate. Was advised by the loans officer to take the fixed rate option.

Don't expect independent, professional advice in your best interests from a tied agent. What reason did they give for this being the better option?

I thought that once you took a fixed rate option you were tied into that rate for the full duration of the loan and you had to pay a penatly to repay the loan early.

That's normally the case alright. Did you check the terms & conditions of the fixed rate option and, in particular, what penalties might apply for early redemption?

Is the bank official correct?

In relation to what exactly?

 

[woods]

I would think that if you are planning to pay off the loan in a short term that a fixed rate would be the worst possible thing for you.
The purpose of a fixed rate is to protect you from the long term risk of rising rates and you pay a premium over the current rate for this protection. You do not need this.

 

[asdfg]

Just to follow up on this, I paid off the fixed rate short term loan in full with no penalty. Seems that when interest rates are rising it is best to take a fixed rate. Check with the bank and the terms and conditions of course before committing.