Taking on a loan is a long-term commitment. Especially in the case\nof home loans, as they tend to\nhave longer tenures as compared to other loans. You need to be thoroughly informed\nabout what you\u2019re signing up for, or you might find yourself in a tough spot\nlater on. <\/p>\n\n\n\n
The interest rate is the most important consideration when applying for a loan. You are likely to choose a lender that offers lower interest rates than others. But did you consider what type of interest rate works best for you? Home loan interest rates<\/a> could be fixed or floating. Almost all lenders will offer you a choice between fixed interest rate and floating interest rate home loans.<\/p>\n\n\n\n Read on to find out the differences\nbetween fixed and floating interest rates for home loan.<\/p>\n\n\n\n A fixed interest loan, as the name suggests, has a fixed rate of\ninterest throughout the entire tenure. Economic fluctuations do not affect the\nrate of interest and therefore the borrower has to pay fixed, equal EMIs over\nthe entire loan period.<\/p>\n\n\n\n In the case of loans with a floating interest rate, the rate of\ninterest is subject to change according to the prevailing economic conditions.\nThe floating interest rate is made up of a base rate and a floating element.\nThe floating element is expressed as a percentage of the base rate. Therefore,\nif the base rate changes, the floating element automatically changes. Lenders\nrevise their floating interest rates as per the quarterly base rate\nannouncements made by the RBI.<\/p>\n\n\n\n Additional\nRead:<\/strong> Some\nFactors That Impact Home Loan Interest Rates<\/a><\/p>\n\n\n\n Both fixed and floating interest rates have their advantages and\ndisadvantages. The most noticeable difference\nbetween fixed and floating interest rates for home loan is that fixed\ninterest rates are higher than floating interest rates. The difference can be\nanywhere between 1% and 2.5%. But some borrowers might not mind paying a\npremium for the sense of certainty that loans with a fixed interest rate allow.\n<\/p>\n\n\n\n Considering that a home loan might take decades to pay off, many\npeople, especially salaried individuals, budget their expenses around their\nEMIs. If their EMI was to increase all of a sudden, it would throw off their\nentire budget. Therefore, when buying a\nhouse, such borrowers would prefer a fixed interest rate home loan even\nif they have to pay a higher EMI. <\/p>\n\n\n\n Others may not mind the fluctuation in their EMIs as much. They\nmight be more interested in getting a cheaper loan, especially if they are\noptimistic about the future and don\u2019t expect the interest rates to rise much.\nBut even if the floating rate increases, say it even goes beyond the fixed-rate,\nit will stay there for a limited period and not for the entire tenure of the\nloan. The interest rate is most likely to fall over a long period. In which\ncase, floating interest home loans could help you save a lot of money.<\/p>\n\n\n\n Additional Read:<\/strong> Check out how to calculate interest rate on home loan<\/a><\/p>\n\n\n\n So, floating or fixed home loan, which is better? There is no definitive answer to the question. What works well for one borrower, might not work for the other. You could visit the Tata Capital website and use the home loan EMI calculator<\/a> to see what suits you better. Tata Capital offers home loans<\/a> at attractive interest rates and minimum documentation to help you cover costs for all your housing needs. <\/p>\n\n\n\nFixed interest rate<\/strong><\/h2>\n\n\n\n
Floating interest rate<\/strong><\/h2>\n\n\n\n
Floating vs fixed interest rates <\/strong><\/h2>\n\n\n\n