What is the difference between a fixed-rate and adjustable-rate loan?

A fixed-rate loan locks in the same interest rate for the entire loan term, so your monthly principal and interest payment never changes. This provides payment predictability and protects you from rising rates. An adjustable-rate mortgage (ARM) starts with a fixed rate for an initial period (e.g., 5 or 7 years), then adjusts periodically based on a market index. ARMs often start with lower rates, but carry the risk of higher payments if rates rise. Fixed-rate loans are better for long-term stability; ARMs can save money if you plan to sell or refinance before the adjustment period.