What is difference between floating and fixed rate of Interest?

Are you

planning to buy a house through a home loan? It is important to know a few factors before diving into the pool of home loan schemes and types of interest rates. Study the

difference between floating and fixed rate of interest carefully before finalizing your choice.

I will explain the difference between fixed and floating interest rates by explaining both of them in detail. 

The floating rate of interest keeps on changing as per the market or index rate. Floating interest rates are also known as variable interest rates. 

• Floating rates are usually lower than fixed rates. 

• As floating rates keep on floating so there may be a situation when index or market-rate rate low which eventually cuts down the EMI costs. 

• In a floating rate, there is no payment penalty. This helps borrowers to clear their debts without burden.

Fixed interest rates are the rate of interest that remains constant throughout the loan tenure. It is an unchanging interest rate. In fixed interest rate EMI and loan repayment duration will also remain fixed.

• Fixed interest rates are safer as compared to floating rates.

• In fixed interest rates a person can maintain the certainty of payment as interest rates are fixed.

• When a person avails a fixed interest rate, he can make his monthly budgeting easy.

These are the difference between floating and fixed rate of interest.

A floating interest rate, also known as a variable or adjustable rate, can change periodically based on market conditions or a specified index, resulting in fluctuating loan or investment payments. In contrast, a fixed interest rate remains constant throughout the entire duration of the loan or investment, providing predictable and unchanging payments. The difference between floating and fixed interest rate however, is not restricted to this. There are several other differences between the two. I have been working in the banking sector for several years now so let me help you understand what is the difference between fixed and floating interest rates.

What is the Difference Between Floating Rate and Fixed Rate?

The differences between the floating rate and fixed rate are:

These are some of the major differences between fixed and floating rate.