Variable-rate loan(redirected from Adjustable-Rate Loan)
A loan with an interest rate that changes periodically. Generally speaking, a variable rate loan is linked to some major benchmark rate; for example, the interest rate may be stated as "LIBOR + 1%." The loan may or may not have a cap on how much the interest rate can rise or fall, or on how often the interest rate may change. Very often, the initial interest rate for a variable-rate loan is lower than that for a fixed-rate loan. This allows more people to qualify for a loan; however, this kind of loan can be risky because the interest rate (and therefore the monthly payment) can rise unexpectedly. See also: Adjustable-rate mortgage.