A type of loan where the interest rate is predetermined, and does not fluctuate during the term of the loan. Fixed rate loans allow borrowers to accurately calculate future financial obligations, in the form of both principal and interest payments.
This type of loan does not restrict the interest rate from changing over the course of the loan, however. As seen in practice, many fixed rates loans can change rates year-to-year. As long as the interest rate is pre-determined and does not reference a base rate, the loan can be considered a fixed rate loan.
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