Loan on Floating Interest Rate and Fixed Interest Rate Difference
Key Differences Between Fixed and Floating Interest Rate Loans
| Factor | Fixed Interest Rate | Floating Interest Rate |
|---|---|---|
| Stability | EMI remains constant throughout | EMI varies with market rates |
| Initial Interest Rate | Usually higher than floating rates | Generally lower initially |
| Risk Factor | Low-risk, suitable for conservative borrowers | Higher risk due to interest rate fluctuations |
| Prepayment Charges | May include penalties | Often comes with lower or no prepayment penalty |
| Loan Tenure Impact | Tenure remains fixed unless refinanced | Tenure may increase or decrease with rate shift |
| Transparency | Clear and predictable | Requires understanding of benchmark rate trends |
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