Personal loans are a reasonable way to meet your sudden financial needs. However, it is always better to do a bit of research before taking a loan. For instance, you need to know about the interest rates. That will determine your EMI amount.
Are you aware of the two types of personal loan rates? It can either be fixed or floating. Before you rush to get an instant personal loan, you must know every minute detail about these two types of interest rates. That will let you make an informed decision. You can apply for a personal loan here: https://www.fullertonindia.com/personal-loan.aspx
What Is Fixed Rate Of Interest For Personal Loans?
A fixed interest rate means that the rate of interest will not change throughout the loan period. So, if you take a loan for five years, the interest rate will remain unchanged throughout the tenure. You will know the instalment amount that you have to pay every month.
Advantages of Fixed Interest Rates
- Since the interest rates are fixed, you can do your financial planning well in advance. It will help to run your finances smoothly.
- If you take a loan when the interest rates are low, you can avail the same rate even if the market conditions change later on. Isn’t that great?
- Both the borrower and the lender can easily keep track of the payments.
Drawbacks Of Fixed Interest Rates
- The initial instalments are higher than in the case of floating rates.
- If the interest rates decrease during the loan tenure, you will be unable to take the benefit. You are bound to pay the same interest rate throughout the loan period.
What Is Floating Rate Of Interest For Personal Loans?
Unlike fixed rates, floating interest rates might change during the loan period. It depends on the market conditions and the repo rate. So when you opt for floating interest rates, you will have no idea about your future instalments.
Advantages Of Floating Interest Rates
- The initial interest rates are lower than fixed rates.
- It allows you to save your hard-earned money when the interest rates drop.
- Floating interest rates provide a lot of flexibility. For instance, when the rates fall, you can use the money saved for some other fruitful purpose.
Cons Of Floating Interest Rates?
- Though the initial rates are low, they might rise in future and lead to financial losses.
- You cannot stick to a financial plan. The monthly interest rates keep on changing from time to time.
Now that you have understood the pros and cons of each type of interest rate, you need to know when to opt for them.
When To Go For Fixed Interest Rates?
- If you want stability in your instalments, you must go for fixed rates. You will not get affected by changes in the market.
- If you wish to know your EMI right from the beginning, it is the best option.
- Are you a market expert? In that case, you might foresee a rise in interest rates and opt for a fixed rate of interest.
When To Opt For Floating Interest Rates?
- Can you foresee a drop in interest rates? Then you must choose flexible rates to avail the benefit and save a few bucks.
- If you do not have much idea about the trends, you can opt for flexible interest rates and leave them to the market.
To get the best personal loan rates, you cannot take an impulsive decision. Make sure you do your research first.
The Bottom Line
Whether you will choose fixed or flexible interest rates depends on a lot of factors. You need to consider the loan tenure and make yourself acquainted with the market trends as well. That way, you can make a well-informed decision. Are you looking for a reliable lender? It understands your requirements and offers personalised solutions. So, why are you waiting? Apply for a personal loan today!