When it comes to applying and securing a loan in India, your prospective lenders will offer you two types of interest – fixed and floating interest rate.
Some borrowers face the dilemma of fixed interest rate vs floating interest rate while deciding to avail the best loan rates that could help them save money. Applying for the fixed interest rate means paying a fixed loan EMI over the tenor.
People with a fixed income and who don’t want to hamper their monthly income opt for the fixed rate. It saves them from the fluctuating EMIs that’s payable while opting for the floating rates. People who are also opting for a long tenor go for the fixed rate so that they can pay a fixed EMI and something that does not impact monthly income.
On the other hand, a floating interest rate system asks for a fluctuating EMI which is dependent on the benchmark rate of the lender as well as the market trends. People who opt for short-term loans and willing to repay it quickly opt for a floating rate. They want to make the most of the market conditions to pay higher or lower loan EMIs.
If you are all set to apply for a floating interest rate in India, there are many advantages of floating interest rate that you can pocket. Let’s see some of the benefits of floating interest rate:
Key Benefits of Floating Interest Rate in India
1) Enjoy a Lower Rate of Interest
Being a borrower, the provision of paying the loan interest rate may not come as a pleasant thing to everyone. Hence, the payment of the interest rate on the lower side is preferred by those who are willing to keep their existing expenses low. That’s where availing the floating interest rate over a long-term can help all such borrowers.
2) Make Way for Some Unprecedented Gains
People applying for a loan with the floating interest rate also expose their financial freedom to developments and operations in their respective economy and market. The risk of availing a fluctuating floating interest rate is neutralized at the viewpoint of a prospective gain that may come up due to the plunge in the market’s interest rates.
3) The Scope of Saving Goes Up
Compared to the fixed interest rates, any loan facility with a floating interest rate makes the borrower pay a smaller amount for the periodic instalment. As a result, the borrower is also entitled to save the benefits to curtail the probability of upward and downward trends prevailing in the market. Nonetheless, it is the debtor’s own decision that remains the best judge of how much he/she can save till the economy permits it.
You are now aware of How to Choose Between Floating and Fixed Interest Rates and some of the major benefits that a loan with the option of the floating interest rate can help you. If you are ready to apply for a loan with the floating interest rate, you will feel more confident while applying for it.
There are many more benefits of floating interest rate in India that you can enjoy upon availing a loan if you understand the market trends and read the loan’s fine prints.
Whether or not a loan borrower should avail a Home Loan with a floating interest rate or the fixed interest rate completely depends on the needs and income of the debtor.
Thus, before making a decision, ensure to assess your needs, affordability and other aspects to help you make a uniformed decision.