Floating rate home loan

A float­ing rate loan is referred as vari­able or flex­i­ble inter­est rate loan. The rate of inter­est rate keeps chang­ing. The change in inter­est rate depends on the mar­ket con­di­tions and the inter­est rate on your loan will go up or come down depend­ing on how the inter­est rate is mov­ing. This, in turn, will impact your EMI.

Ben­e­fits of float­ing inter­est rate home loan

Cheaper than fixed rate

Float­ing rate home loans are at least 1%-2% cheaper than fixed inter­est rates. At the time of tak­ing a home loan, float­ing rate is cheaper than a fixed rate home loan.

Falling inter­est rate

In case of falling inter­est rate sce­nario in the econ­omy, a float­ing rate home loan is a best option. When the banks lower the rate of inter­est rate on home loan, the float­ing rate inter­est rate also drops.

Draw­backs of float­ing inter­est rate home loan

Uneven monthly installments

Due to change in inter­est rate, the EMIs also changes. The borrower’s cash out­flow changes based on the rise/fall in inter­est rate. The bor­rower has to face an unnec­es­sary bur­den of cash out­flow dur­ing a inter­est rate rise.

Related posts:

1. Fixed rate home loan
2. Fixed or Float­ing rate home loan: Which is Better?
3. Good News for Float­ing rate home loan, auto loan borrowers
4. Axis Bank fixed rate home loan – Nischint
5. Is fixed rate home loan really fixed?