What does it mean by a fixed interest rate?

A fixed interest rate refers to a loan or investment interest rate that remains constant throughout the life of the loan or investment. This means that the borrower or investor will pay the same interest amount for each period, providing predictable and stable monthly payments.

This consistency helps individuals plan their budgets and financial commitments, as they won’t face unexpected increases in interest costs over time. Fixed interest rates are commonly associated with long-term loans, such as mortgages or auto loans, where stability is particularly valued.

In contrast, interest rates that change or fluctuate — such as the ones described in the other options — can lead to uncertainty in financial planning, making it challenging for borrowers to know exactly how much they will owe in the future.