Fixed or floating , which rate to go for?

If a choice is give to a person who does not have much of knowledge about home loans between fixed and floating interest rates given the present day situation in which the interest rates are soaring then at a first go he might give a thought to the fixed rate scheme. But is it is so, are the interest rates under fixed loan scheme really fixed?

The answer to that question is no. The banks generally reset the fixed interest rates offered to the customers in after every 2 or 3 years, depending on the market situation. Apart from that, the interest rates under the fixed rate scheme are far much costlier than the interest rates under floating rate scheme.

Talking about the floating interest rate scheme, they are very volatile in nature specially in the times that we live in. the rate of interest are on a constant high and each time there is a hike in the interest rate the burden of EMI on a borrower increases.

There is very little that a customer could possibly do about all this but he sure is left with a few options. Like if a borrower feels that he will not be able to afford such high EMIs then he can request the bank to increase the loan term or if a borrower can also prepay the loan. However if the borrower is prepaying the loan amount other than his own sources then most of the banks levy prepayment penalty on the customer.

Whatever the case might be, floating or teaser loan scheme is a far better option than the fixed interest rate scheme.