A loan with a set or fixed rate of interest. Both the interest rate and the monthly payments (for principal and interest) stay the same during the life of the loan. Fixed-rate loans generally have repayment terms of 15, 20, or 30 years.
A loan in which the interest rate remains static throughout the term of the loan. Fixed rate loans are best to take out when interest rates are low because it allows an individual to lock in the low rate and not be concerned with fluctuations. However, if interest rates were historically high at the time of the loan, the individual would benefit from a floating rate loan, because as the prime rate fell, the rate on the loan would decrease.