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Fixed vs Floating Rate of Interest | Home Loans in Hinjewadi | 1 and 2 BHK in Wakad, Pimpri, Chinchwad, Punawale

Fixed and Floating

By choosing a fixed rate of interest for your apartment you will pay the exact same percent of interest in the entire tenurity of your loan. The equatable monthly installments will not change. However, the Floating rate of interest, the more popular of the two, offers the flexibility of adjusting the EMI as per market dynamics.

Advantages and Disadvantages of Fixed Interest Rates:
Since home loans come with a longer tenure compared to most other loans, a fixed interest rate brings a sense of clarity when it comes to loan repayment. People with fixed budgets can get a clear idea of their EMI obligations if they opt for a fixed interest rate loan.
The biggest disadvantage of such a setting is that the fixed interest rate loans are anywhere between 1 to 2.5% higher than floating interest rate depending on the bank or NBFC. Usually most banks offer fixed interest rates for limited years and not the full tenure, making the user susceptible to floating market rates once the fixed rate tenure period is over. So read your loan agreement carefully before you proceed
Advantages and Disadvantages of Floating Interest Rates:
Floating interest rate fluctuates with market economics and interest rates are linked to a base rate and a floating component. The base rates are decided by the bank or NBFC concerned as per the quarterly base rate announcements of the Reserve Bank of India. Floating interest rates are usually lower than fixed interest rates although parameters like inflation and current account deficit are used in calculation of base rate by RBI which can mean an uncertainty and different EMI for each repayment or installment for the loan.

Point to note:

1.Fixed rate interest charges are generally 1- 2.5 percent higher than floating rate charges.
2. On October 5 RBI reduced the REPO rate from 6.5% to 6.2%. REPO rate is the rate at which banks borrow money from RBI.
3. MCLR – Marginal Cost of Funds based Lending Rate introduced by RBI in April 2016 to ensure lower interest rates with quicker disbursements, consistently.
4. After the historic Demonitisation move by Narendra Modi on November 8, all banks with massive cash inflow are encouraged to offer loans at discounted interest rates.

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