The difference between a fixed rate loan and adjustable rate loan is that, for a fixed rate the interest rate is set when you get the loan and it does not change for the life of the loan. With an adjustable rate loan the interest rate may go up or down. Many adjustable rates start at a lower interest rate, sometimes lower than fixed rate loans, but after the initial rate stays the same for either months or years, the adjustable rate will change due to the interest rate being based on the market index. This will cause your monthly payments to either go up or down depending on the conditions of the market.