Floating rate of interest or flat rate of interest is better for those who have taken various loans?
Overall loan interest rates are now on the rise. Even for home loans, the interest rate is now more than nine percent. Keeping interest rates steady is reassuring for both lenders and buyers. Opting for a fixed rate home loan may also mean paying higher interest rates for a longer period of time.
A fixed interest rate option can be a comfort to those who have taken home loans, car loans and other loans. The feature is that loans taken at low interest rates can be continued at the same rate. But if the RBI lowers the repo rate later, if the interest rates fall again, this rate will not be available.
The Monetary Policy Committee said that the RBI will soon prepare a framework to allow borrowers to switch from floating interest rates to fixed interest rates. Lenders need to communicate with borrowers about the loan tenure and EMI to set up the framework.
For those opting for a floating rate, interest rate hikes can be problematic. If the impact of the financial crisis continues, floating-rate loans will cost more than fixed-rate borrowers who choose a lower loan rate.
