Conundrum of the borrowers to choose between fixed or floating

Posted by Anurag Mishra on September 6th, 2017

Still stuck in the dilemma of fixed and floating HDFC Home Loans Interest Rates? Let’s help you to break the ice and reach the conclusion of getting an ideal home loan that is pocket friendly. Credit score updated, margin money saved, property and loan amount decided, the only confusing thing is the interest rate; right? Okay let’s understand first, what is the interest rate? The financers give you the home loan to buy a property; the borrower needs to pay it back within a stipulated period of time along with an extra amount over the principal amount. This extra amount is termed as interest cost which you pay every month in the EMIs. The rate at which you pay the extra amount per annum to the financer is termed as interest rate.

For example if you taken a loan of 10,00,000 at 8.4% interest per annum for 10years then your EMI would be 12,345 that makes an interest amount of Rs. 4,81,418.After the end of the loan tenure the borrower pays Rs. 14, 81,418 as total home loan. It is an instance of floating rate of interest, hope this illustration helps you to understand the interest rate. Generally the financers determine the rates depending on the market value and government policies. The operating cost and profit share of the financer determines the HDFC Home Loans Interest Rates that the institution offers, which varies from one financer to other.

Depending on the financer you can get the option to choose between fixed or frozen rate and adjustable or floating rates, some financers offer truly fixed or semi-fixed rate of interest. Each rate has their own benefits and drawbacks, your diligent planning can help you to get through the loan term smoothly without overburdening your debt.

The fixed or frozen rate is constant in nature and remains the same till the end of the loan term. As the rate is fixed, it is shielded from the fluctuating market conditions and you have a fixed monthly expenditure on the EMI. It is slightly more than the floating rate of interest.

When the borrower takes the home loan at a floating rate of interest, then the rate fluctuates depending on the market condition and government policies. It’s subject to the market condition so your gain or loss depends on the health of the market. In the present scenario, when the economy is developing chances are there that the rates may come down more, though they are lowest in the home loan history. So a floating rate may reduce your interest cost, if the market condition remains healthy. In rare scenario of dire market condition the rates may rise.

Some financers offer the semi-fixed rate of interest that switches to floating rate after committed fixed rate interest period.

The HDFC Home Loans Interest Rates vary from one borrower to another depending on:

  • The job profile of the borrower.
  • Credit score.
  • Location of the property.
  • Principal loan amount, loan tenure and type of interest.

Like us you also use the EMI calculator, calculate your EMI with different combinations of principal amount, interest rate and loan tenure, then select the suitable financer that will cater to your needs and would not dig a hole in your pocket. A tip if you have a good credit score and an earning co-applicant then you can even negotiate the rates with the financer.

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Anurag Mishra

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Anurag Mishra
Joined: December 13th, 2016
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