Variable Interest Rate

A variable interest rate is an interest rate on a loan or security that changes over time based on a market index or benchmark, such as the prime rate or SOFR. As the index fluctuates, the interest rate and thus payments rise or fall accordingly. This type of rate is common in mortgages, credit cards, home equity lines, and certain business loans. Variable rates offer the possibility of lower payments when market rates decline, but payments can increase if market rates rise.​