Loan on Floating Interest Rate and Fixed Interest Rate Difference
Pros and Cons of Floating Interest Rate Loans
✅ Pros:
-
Lower Initial Rates:
Usually cheaper than fixed-rate loans in the beginning. -
Benefit from Market Trends:
If market rates fall, you save on interest and EMIs. -
Lower Prepayment Charges:
RBI guidelines have reduced or eliminated prepayment penalties for floating rate home loans.
❌ Cons:
-
Unpredictable EMIs:
Your monthly payments could rise, affecting your financial planning. -
Higher Risk:
Floating rates can be volatile during inflation or repo rate hikes. -
Uncertain Total Interest Payable:
Because the rate can change, you can’t predict the exact interest you’ll end up paying.
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