Final answer:
The primary distinction between a payday loan with a variable interest rate and one with a fixed interest rate is how the interest rate is determined and whether it can change over time.
Step-by-step explanation:
The primary distinction between a payday loan with a variable interest rate and one with a fixed interest rate is how the interest rate is determined and whether it can change over time.
A payday loan with a fixed interest rate has an interest rate that remains the same throughout the entire loan term. This means that the borrower will always know what their interest payments will be and can budget accordingly.
On the other hand, a payday loan with a variable interest rate has an interest rate that can change over time.
The rate is usually tied to an index, such as the prime rate or the LIBOR, and may change periodically based on changes in that index. This means that the borrower's interest payments may go up or down depending on market conditions.