- A type of loan with an interest rate that changes over time in line with market conditions, but within set minimum and maximum rates. These loans typically start with a lower interest rate than fixed-rate loans, but payments can increase or decrease as rates rise or fall
- The benefit of adjustable-rate loans is generally lower initial payments.
- With adjustable-rate loans, changing market conditions can result in fluctuating monthly payments.
- Loanees should be aware that adjustable-rate loans can have both minimum and maximum rates.