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Loan on Floating Interest Rate and Fixed Interest Rate Difference

difference between floating and fixed interest rate

Pros and Cons of Floating Interest Rate Loans

✅ Pros:

  1. Lower Initial Rates:
    Usually cheaper than fixed-rate loans in the beginning.

  2. Benefit from Market Trends:
    If market rates fall, you save on interest and EMIs.

  3. Lower Prepayment Charges:
    RBI guidelines have reduced or eliminated prepayment penalties for floating rate home loans.

❌ Cons:

  1. Unpredictable EMIs:
    Your monthly payments could rise, affecting your financial planning.

  2. Higher Risk:
    Floating rates can be volatile during inflation or repo rate hikes.

  3. 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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