What is the term used for interest rates that change during the term of the loan?

Correct option is C

The term used for interest rates that change during the term of a loan is floating rate. These rates are not fixed and fluctuate with changes in the underlying reference rate or index, such as the LIBOR (London Interbank Offered Rate) or a central bank's benchmark rate.

The term variable rate is often used interchangeably with floating rate, but floating rate is more specific and commonly used in finance.

Information Booster:

Floating Rate

• Definition: A floating rate adjusts periodically based on changes in a benchmark interest rate.
• Advantages: Provides flexibility in response to market conditions, potentially benefiting borrowers when interest rates fall.
• Disadvantages: The borrower bears the risk if the rates increase.

Other Terms

• Variable Rate: Similar to floating rate, but may not always adjust as frequently.
• Drifting Rate: Not commonly used in financial contexts.
• Buoyant Rate: Also not a standard term in finance.