Which One is Ideal Home Loan Rate - Floating or Fixed?Financial Management & ConsultingUpdated on Jul 13, 2018 View more like this | Visit India, UN | Contact Anamika Verma |
Buying a house is a dream for everyone. To fulfill this dream, you can take a Home Loan at a good rate of interest so that you can repay it conveniently over the specified period of time.
The decision of choosing the Housing Loan interest rate is not that easy. Both the fixed and the floating rate of interest has its own pros and cons. You need to choose the one that meets your requirements.
Fixed Rate of Interest
In a fixed rate Home Loan, the rate of interest is fixed over the entire period of the loan. This means that you need to repay the loan in fixed equal monthly installments. The interest rate does not change with market fluctuations.
Benefits of Fixed Rate of Interest
Here are a few benefits of a fixed rate of interest:
> If the market conditions change and the interest rate rise, you need not have to pay the higher rates since your Home Loan rate is fixed.
> If you want a regular monthly repayment schedule, then a fixed rate of interest is the best for you.
> Fixed rate of interest is more safe and secure.
Floating Rate of Interest
In a floating rate Home Loan, the rate of interest changes with the changing market conditions. This rate of interest is the sum of a base rate and a floating rate. This means that if the base rate changes, the floating rate of interest will also change.
Benefits of Floating Rate of Interest
Here are a few benefits of floating rate of interest:
> Floating rates are lower than fixed rates. For example, if you take a loan with a floating rate of 10% and the market fixed rate is 14%, then you will not suffer a loss even if the floating rate increases by 3%.
> If the floating rate increases more the fixed rate, it will not remain for a long period of time. Floating rates do fall after a certain period. Hence, it will ultimately help you to make more savings.
> With a floating rate of interest, the EMI amount that you need to pay is always lower than that for a fixed rate Home Loan.
The Bottom Line
Looking at the various benefits of different types of Home Loan rates, you can now decide what suits you best. Borrowers usually choose a floating rate of interest as it gives a lower EMI.
But, in the end, it depends on your requirements and convenience.
You can compare the different Home Loans with the Home Loan EMI calculator and choose the interest rate which gives you better comfort to repay your loan.
The decision of choosing the Housing Loan interest rate is not that easy. Both the fixed and the floating rate of interest has its own pros and cons. You need to choose the one that meets your requirements.
Fixed Rate of Interest
In a fixed rate Home Loan, the rate of interest is fixed over the entire period of the loan. This means that you need to repay the loan in fixed equal monthly installments. The interest rate does not change with market fluctuations.
Benefits of Fixed Rate of Interest
Here are a few benefits of a fixed rate of interest:
> If the market conditions change and the interest rate rise, you need not have to pay the higher rates since your Home Loan rate is fixed.
> If you want a regular monthly repayment schedule, then a fixed rate of interest is the best for you.
> Fixed rate of interest is more safe and secure.
Floating Rate of Interest
In a floating rate Home Loan, the rate of interest changes with the changing market conditions. This rate of interest is the sum of a base rate and a floating rate. This means that if the base rate changes, the floating rate of interest will also change.
Benefits of Floating Rate of Interest
Here are a few benefits of floating rate of interest:
> Floating rates are lower than fixed rates. For example, if you take a loan with a floating rate of 10% and the market fixed rate is 14%, then you will not suffer a loss even if the floating rate increases by 3%.
> If the floating rate increases more the fixed rate, it will not remain for a long period of time. Floating rates do fall after a certain period. Hence, it will ultimately help you to make more savings.
> With a floating rate of interest, the EMI amount that you need to pay is always lower than that for a fixed rate Home Loan.
The Bottom Line
Looking at the various benefits of different types of Home Loan rates, you can now decide what suits you best. Borrowers usually choose a floating rate of interest as it gives a lower EMI.
But, in the end, it depends on your requirements and convenience.
You can compare the different Home Loans with the Home Loan EMI calculator and choose the interest rate which gives you better comfort to repay your loan.
