Why should you choose a Floating rate Home Loan?
13 Jun 2022
Table of Content
Taking a home loan is one of the most common ways to finance the purchase of your dream home. The home loan provider can either charge you a floating or fixed rate of interest on your debt. While a fixed interest rate can help you get a sense of security, a floating interest rate can potentially help you generate savings. For this reason and a few more, many people prefer to procure a floating rate home loan.
If you are wondering what is floating rate of interest in home loan, here’s a quick guide to help you understand.
What is floating rate home loan?
A floating rate home loan is one in which the interest rate charged by the lender changes with the market interest rate. This means that, if the interest rate charged in the market comes down, the interest rate charged on your home loan comes down as well. The floating interest rate is reset at regular intervals that are pre-defined by the lender.
It is important to remember that when the interest rate on your loan gets changed, it is usually the tenure of the loan that is adjusted. For example, if the interest rate charged on your loan is increased, then instead of increasing your monthly EMI amount, the creditor extends your loan tenure.
Main advantages of a floating interest rate home loan?
Taking a floating rate home loan is quite beneficial for many reasons, such as:
• Helps you generate savings
People usually take floating interest rate home loans when they expect the market interest rate to decrease in the future. If the market interest rate decreases, they get to enjoy a lower cost of procuring the loan.
• Usually cheaper compared to fixed interest rate home loan
The cost of procuring a fixed interest rate home loan is usually higher when compared to the cost of procuring a floating interest rate home loan. Even if the floating interest rate increases more than the fixed interest rate, the rise is only temporary and there are good chances of the floating interest rate decreasing thereafter.
• Ability to pre-pay loan without any penalty
Unlike fixed interest rate home loans, floating interest rate home loans do not charge you any pre-payment or foreclosure charges. Due to this, you can easily pre-pay your home loan without incurring any additional charges.
How do floating interest rates operate?
The floating interest rate is pegged to an internal or an external benchmark by the lender. The intervals at which the interest rate is reset are pe-defined by the lender in the sanction letter or in the loan agreement document.
FAQs
1. Can you change your floating interest rate home loan to fixed interest rate home loan?
Yes. Many lenders allow you to change your floating interest rate home loan to fixed interest rate home loan. However, they might charge you a fee for the change.
2. Which is more beneficial, a fixed interest rate home loan or floating interest rate home loan?
The right interest rate type typically depends on the needs of the borrower. If you want to plan your finances in detail for the future or if you expect the market interest to up, choosing a fixed interest rate home loan might be a good option for you. Alternatively, if you wish to save money, pre-pay your loan, or expect the market interest rate to decrease, a floating interest rate home loan might be the right choice for you.
3. Does Bank of Baroda offer both fixed and floating interest rate for home loans?
No, Bank of Baroda only offers floating interest rate home loans. Currently, Bank of Baroda offers home loans starting at an attractive interest rate of 6.50%. Furthermore, home loans from Bank of Baroda have a repayment tenure of up to 30 years.
4. How to contact Bank of Baroda?
For assistance, you can contact a customer service representative on the toll-free numbers - 1800 5700. You can also give a missed call to the bank so they can get back to you for your queries on – 8467001111. You can also simply visit any Bank of Baroda branch that is the nearest to you.
Popular Articles
Tag Clouds
Related Articles
Guide to Getting Agriculture Loan: Application, Eligibility & Required Documents
-
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes and do not necessarily reflect the views of Bank of Baroda. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Bank of Baroda and/ or its Affiliates and its subsidiaries make no representation as to the accuracy; completeness or reliability of any information contained herein or otherwise provided and hereby disclaim any liability with regard to the same. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Bank of Baroda or its affiliates to any licensing or registration requirements. Bank of Baroda shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
What is Tenure in a Personal Loan and How to Choose the Loan Tenure Smartly?
A personal loan is an unsecured type of a loan which means that you can borrow the funds without handing over any collateral. The borrowed money can be used for various purposes such as tackling an emergency, financing your business, or pursuing your
educational goals. However, since you do not need to provide collateral to procure a personal loan, the interest rate charged on these loans is relatively higher when compared to other types of loans, such as home loans or student loans. Due to this,
5 Key Factors That Affect Your Personal Loan Interest Rate This Year
Do you need money to pay the security deposit on your rented flat? Or perhaps you are facing a medical emergency that goes beyond the coverage of your health insurance plan. A personal loan is a type of unsecured loan that helps you get access to quick
cash in such situations of need. Features of personal loans include collateral-free applications, speedy approvals and disbursals, attractive interest rates, and no end-use restrictions, to name a few. Now, let us look at the factors affecting personal
