Opt for Fixed Rate or Floating Rate Home Loan? Which is Best

Opt for Fixed Rate or Floating Rate Home Loan? Which is Best

The Basics of Home Loan • Now that you have applied for a home loan, you need to think about the right rate of interest. Well, a rate of interest is an important component to avail of a home loan. It plays a huge impact on your borrowing experience.

However, there are two types of rate of interest- fixed rate and floating rate of interest. It completely depends on you to choose one based on your needs. If you need the right borrowing experience, make sure you choose the right type. Before that, make sure you have a complete understanding of both types to make the right decision.

What is a fixed rate of interest?

• A fixed-rate of interest is the most common form of interest. This is very commonly found in various financial institutions.

Here, the rate of interest is fixed from the time of loan approval to loan repayment end tenure. This rate of interest will not change under any circumstances. No factor can change the rate of interest. It remains fixed for the entire tenure. Factors like loan providers, market conditions cannot make any changes in the loan interest rate. This fixed rate of interest will help you manage your finances and there will be no ups and downs in the rates. The EMI will remain fixed without any changes. Read More : Business loan in india.

What is a floating rate of interest?

• A floating rate of interest is opposite to the fixed rate of interest. In a floating rate, the rate will keep changing throughout the loan tenure. It is subjected to various factors that are responsible to bring in change. The market conditions are completely responsible for this change in the rate of interest. You may get a low rate sometimes and then a high one as per the market conditions. The rate can go down or can rise too. However, this will affect the EMI. It will be difficult to understand your EMI and then take the right financial steps.

When EMI goes up or down, there will be a lot of hurdles in managing your debt.

Wrapping up • In a nutshell, both fixed and floating rate has advantages and disadvantages. You need to think about your individual needs and financial condition before choosing one. Keep your home loan eligibility criteria right so that you can go for a fixed and low rate. Too many variations with a floating rate can affect your finances in a bad way.

Clix Capital Services Private Limited

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