When it comes to buying a dream home that can match your needs and budget, the reliance of people on home loans has gone up because of the lower interest rates.
If you have the required home loan eligibility, you can get a home loan as per your needs to own a home. However, since a home loan is offered to you to make a home purchase, you need to repay it back to the lender.
The repayment is made by home loan borrowers in the form of home loan EMIs which consist of the principal and the interest. The interest money is what the lender earns for offering you the loan.
However, when it comes to the home loan interest rates that are offered by lenders in India, these are of two types – fixed and floating interest rate. Thus, if you want to avail a home loan in future and confused in Fixed vs Floating interest rate, here is some help which will guide you which one to choose out of both.
Fixed vs Floating Interest Rate
What is a Fixed Home Loan Interest Rate?
As the name suggests, the fixed home loan interest rate asks for a fixed interest rate on your home loan EMIs. It means that when you pay a home loan EMI, your EMI would remain the same as agreed at the time of applying for the loan. Hence, no matter what is the prevailing market conditions, it won’t vary and you will pay a fixed EMI.
Why Opt for The Fixed Home Loan Interest Rate?
Since a house loan is a long-term financial commitment which may eat a considerable portion of your monthly income for long, it is good to know an EMI amount payable.
The biggest benefit of availing of the fixed home loan interest rate is that you are aware of how much to put each month as the home loan EMI. As a result, things are in your control and it does not hamper your monthly payouts.
On the other hand, opting for the floating home loan interest rate may not let you pay a fixed home loan EMI. Since the floating house loan is dependent on market conditions, you may have to pay a higher or lower EMIs. As a result, it may not let you control your monthly income, unlike the fixed home loan interest rate.
What is a Floating Home Loan Interest Rate?
The floating home loan rates are linked to the benchmark rate of the lender which moves it in sync with the market interest rate. You need to pay a higher or lower home loan EMIs when there is a change in the benchmark rate as then the interest also climbs.
Fixed vs Floating Interest Rate – Which One To Go For?
Can’t decide which one to go for when it comes to fixed vs floating interest rate on your home loan? The following reasons will help you out:
Opt for a Fixed Rate If:
- You have a stable income and want to pay a fixed EMI
- You know that the interest rate will rise
- If home loan rates are down and if you want to lock in your EMIs at that rate
Go for a Floating Rate If:
- You are confident that the interest rate will fall
- You are unsure about the interest rate trends
- You want to pocket some savings on your cost of the interest in the near future
- When you can bear the trend of paying lower or higher home loan interest rate
Now that the post has discussed the fixed vs floating interest rate concept, you can opt for one that suits your needs and income and apply for an online Home Loan.
Bajaj Finserv is a leading Non Banking Financial Institution (NBFC) that brings you some pre-approved loan offers that can help you get instant financing.
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