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Understanding Fixed vs. Floating Interest Rate

· Interest Rate,Finance

It is vital for potential borrowers to understand the difference between fixed vs floating interest rate so that they can choose the most convenient option while availing a secured loan. Both of these types of interest rates on loans against property schemes are discussed in detail below.

 

Fixed rates of interest

 

The fixed interest rate on loan against property is decided by the financial institution when they grant the loan. These rates do not change over time since they are not subject to any market fluctuation. Borrowers availing fixed rates for their loans can plan their financial obligations better since these rates ensure that EMI amount payable does not change over every month.

 

Floating rates of interest

 

Contrary to the above, floating interest rates fluctuate. Depending on the market conditions, borrowers might be able to avail very low-interest rates on their loans under this type of interest calculation. Subject to market fluctuations and subsequent rate changes made by financial institutions, they can change every month. Consequently, it is difficult for borrowers to plan their finances if they avail floating rates.

 

Choosing a type of interest rate as the best option is difficult, especially because it depends on the borrower and his/her repayment habits. Considering fixed vs floating interest rate, in case a borrower feels the other option to be more convenient for them, they can choose to opt for a balance transfer. However, they should also keep it in mind to find out the most convenient interest rate available on their loan against property scheme.

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