Loan on Floating Interest Rate and Fixed Interest Rate Difference
Which One Should You Choose?
The decision depends on your financial situation, market outlook, and risk appetite:
✔️ Choose Fixed Interest Rate if:
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You prefer stability and predictability.
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You’re borrowing during a low-interest period and want to lock in the rate.
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You are risk-averse and need consistent EMIs for budgeting.
✔️ Choose Floating Interest Rate if:
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You expect interest rates to drop in the future.
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You are financially flexible and can handle fluctuating EMIs.
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You want to save more over the long term, especially if loan tenure is long.
Real-Life Example
Suppose you take a home loan of ₹30 lakhs for 20 years.
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Fixed Rate @ 9% p.a.:
EMI = ₹26,992
Total Payment = ₹64,78,112 -
Floating Rate @ 8.5% (can vary):
If the rate drops to 7.5% in the future, you save significantly.
But if it rises to 10%, your EMI increases accordingly.
This shows that while fixed rates are safer, floating rates can be more rewarding if timed right.
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