May 27, 2021Personal Loan
The choice of personal loan interest rates, fixed or floating interest rate always confuses borrowers, as it directly impacts the amount of EMI payable and repayment tenure.
To get the maximum advantage of a personal loan, one must understand the difference between the two personal loan interest rate structures and how it impacts the repayments.
Therefore, let’s get into detail and know everything about these two terms.
In the personal loan floating interest rate structure, the interest rate changes during the loan repayment tenure as per the repo rate set by the RBI in their periodic revisions.
The lender adds spread (additional interest rate) to the repo rate and determines the interest rate to be charged from borrowers. Any change to the final interest rate is passed on to the borrower and is adjusted with existing interest rates on the personal loan availed.
One of the biggest drawbacks is the unpredictability of the interest rate changes, therefore, it is harder to forecast the future interest expense. In unfavorable market conditions, the interest rates can rise significantly, which can make budgeting more difficult for borrowers.
In the personal loan fixed interest rate structure, the interest rate during the whole tenure of the loan remains the same, irrespective of the change in repo rate by the RBI. In this structure, the EMI composition (interest + principal) is constant throughout the tenure.
You should choose the floating and fixed interest rate structure under the following circumstances:
Therefore, choosing the interest rate structure should be based on your own knowledge, comfort level, and the advantages that you will receive from choosing a particular interest rate structure.
If you’re still unsure which interest rate structure to select, you can use the Personal Loan EMI Calculator, and check the EMI amount by using different interest rates and tenure. It is also advisable to seek a discussion with your lender to know more.
At Fullerton India, you can apply for a personal loan online and get attractive interest rates, starting from 11.99% onwards.
At Fullerton India, we offer all borrowers fixed personal loan interest rates which are based on monthly income, nature of employment, credit score, and repayment capability.
To check your eligibility, you can use the personal loan eligibility calculator, which calculates the maximum loan amount you can avail of based on your disposable income, repayment capability, occupation, interest rate and tenure.
Both floating and fixed rates structures have their set of pros and cons. Therefore, while applying for a loan, compare the cost structure under both the rate structures and choose accordingly.