What distinguishes adjustable rate loans from fixed rate loans?

Adjustable rate loans are characterized by the fact that their interest rates change over time based on a specific benchmark or index. This means that after an initial fixed-rate period (if there is one), the interest rate on the loan can fluctuate, potentially resulting in lower payments during periods of lowered interest rates or higher payments during periods of rising interest rates. This feature can make adjustable rate loans more flexible for borrowers but also introduces an element of uncertainty regarding future payment amounts.

In contrast, fixed rate loans maintain a constant interest rate throughout the life of the loan, providing predictable and stable payments, which can be advantageous for long-term budgeting and financial planning. The correctness of the answer emphasizes the nature of adjustable rate loans as being inherently variable, making them distinct from their fixed-rate counterparts.