Loans are always a big headache we often have so Fixed or Floating interest which should one go for is written well in this PPT....

1. Fixed or Floating Rate Loans
Which one should you choose?

2. • To own a house is not an uphill struggle,
lately. You will get a home loan for a
nominal rate of interest if you have a
decent credit repayment history. A high
percentage of people take a home loan to
buy a house.
• There are two kinds of loans that will be
applicable to your home loan.
Fixed interest and floating interest.

3. Fixed Interest Loans
• Fixed interest rate is one such rate in which a major
portion of your EMI is used to pay interest during the
initial years of the loan term.
• On the flip side, a lion's share of the amount is used
to pay off the principal during the later years of the
term of the loan. The rate remains constant
irrespective of the fluctuations in the market.
• For eg: if you are paying Rs.1500 as monthly EMI
during the first year and the loan is for 20 years, you
continue to pay that same amount per month
throughout the term of the loan.

4. • Since the EMI remains constant, we can easily make a budget for expenses with
a touch of certainty. In other words, those who have taken a loan with fixed
interest can envision and plan the budget accordingly.
• We can allocate a particular amount, every month, for realizing our goal to own
a house.
• You will benefit from the fixed interest rate loan if there is a possible upsurge in
the rate of interest. In that case, staying in a loan that charges fixed interest will
be advantageous for you.
• Suppose, if your loan charges 9% rate of interest and there are going to be an
increase of 2% ROI in the near future, you will have to pay only 9% interest
throughout, instead of 11%. You can save interest payment up to 2% points.
Pros of Fixed Interest Loans:

5. Cons of Fixed Interest Loans:
• Whatever may be the type of interest, by and large, fixed interest
charges a higher rate of interest than floating interest.
• If the floating interest rate is 9%, the fixed income rate will be 11%.
There will be at least 1 to 2.5 % difference. This fact can be understood
just by going through the repayment schedule.
• If the ROI is going to slash down, fixed interest will not be helpful. In such
a condition, you will benefit by taking a floating interest rate loan.

6. Floating Interest Loans
• Floating Interest is one such rate that changes
according to the fluctuations in the market
conditions.
• There will be two components which make up
the interest amount of the loan. The base rate
and the fluctuating rate. When the base rate
changes according to the changes in the market
rate, the base rate changes. As a result, the
fluctuating component also adjusts itself to
accommodate a fluctuation.

7. • Floating interest loans are comparatively cheaper than the fixed loans.
• Even if, the floating rate of interest becomes higher, gradually, understand
that it has only a fugitive effect as it will come down, subsequently.
Pros of Floating Interest Loans:

8. Cons of Floating Interest Loans:
• The customer will only benefit from the rate of interest comes down.
• It will not be budget-friendly because the amount you have to pay as EMI
will keep on fluctuating every now and then.
• This type of loan is helpful only if the ROI doesn't raise over and above
11.5%.

9. Follow us!
www.financialhospital.in