The interest rate you’re charged on any loan is a big deal because it will determine how much you’ll have to pay back each month. The higher the interest rate, the higher your monthly bill. And yes, the seemingly fractional difference between rates actually matters.

For example, if you take out a 15-year, $50,000 loan, and the rate you’re charged is 11%, your monthly payment will be $568. If your rate were 8% instead on that same loan, your monthly payment would be $478. That’s a savings of $1,080 a year.

Which is why you should exercise caution with variable-rate loans. Most borrowers who default on these do so because they didn’t understand the terms and misjudged how much they’d owe each month in different situations.

To attract borrowers to variable-rate loans, many lenders offer an “introductory rate.” This rate typically is appealingly low, fixed and lasts for up to 12 months, at which point the rate jumps to a higher one that is variable, meaning it can go higher and lower.

The only way to determine if a variable-rate loan with an attractive introductory rate is a good deal is to figure out how much your monthly payments will be once the introductory period expires and how much of an interest rate increase you can tolerate if the prime lending rate rises.

Many people take out variable-rate loans when they plan to repay the loan or refinance it at a lower rate in a relatively short period of time. However, it’s easy for borrowers to get in trouble when they can’t pay off or refinance the debt. Then they wind up trapped with a loan they can’t afford.