variable rate

A variable rate is an interest rate that resets periodically, such as monthly, quarterly or annually. Variable rates are often defined as the sum of a variable rate index, such as the LIBOR index or the Prime Lending Rate, and a fixed rate margin. The margins are often determined based on the borrower’s credit score, where credit scores are grouped into a small set of 5 or 6 tiers and each tier is associated with a different interest rate and fees.