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  • Fixed Vs Floating Interest Rates

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    Ra'fat Jallad
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    The document discusses fixed and floating interest rates for loans. Fixed interest rates remain the same for the loan tenure, while floating rates vary with market conditions. Fixed rates are more expensive upfront but provide stability, while floating rates are initially cheaper but carry more risk from rate fluctuations. The document advises choosing fixed rates when inflation and interest rates are low, and economic growth is slow, while floating rates are better when inflation is high, the economy is booming, and interest rates are rising.

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    fixed vs floating interest rates

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    The document discusses fixed and floating interest rates for loans. Fixed interest rates remain the same for the loan tenure, while floating rates vary with market conditions. Fixed rates are more expensive upfront but provide stability, while floating rates are initially cheaper but carry more risk from rate fluctuations. The document advises choosing fixed rates when inflation and interest rates are low, and economic growth is slow, while floating rates are better when inflation is high, the economy is booming, and interest rates are rising.

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    © All Rights Reserved
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    16 views5 pages

    Fixed Vs Floating Interest Rates

    Uploaded by

    Ra'fat Jallad
    The document discusses fixed and floating interest rates for loans. Fixed interest rates remain the same for the loan tenure, while floating rates vary with market conditions. Fixed rates are more expensive upfront but provide stability, while floating rates are initially cheaper but carry more risk from rate fluctuations. The document advises choosing fixed rates when inflation and interest rates are low, and economic growth is slow, while floating rates are better when inflation is high, the economy is booming, and interest rates are rising.

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    © All Rights Reserved
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    of 5

    DEVTECH FINANCE

    FIXED INTEREST
    LOAN
    RATE

    FLOATING
    LOAN
    INTEREST RATE
    BANKING SYSTEM MODULE
    FIXED V/S FLOATING INTEREST RATE
    FIXED INTEREST RATE FLOATING INTEREST RATE

    • The loan interest rate remains • The loan interest rate moves
    fixed for the entire loan tenure up or down as per market
    or part of loan tenure for a condition during the entire loan
    fixed period irrespective of tenure.
    market conditions. • Bank may change either of
    • EMI and Loan Repayment EMI or Loan Repayment
    Period will remain fix for entire Period to adjust with increase
    loan tenure. or decrease in market linked
    interest rate.
    FIXED V/S FLOATING INTEREST RATE
    FIXED INTEREST RATE FLOATING INTEREST RATE

    • Fixed interest rates are • Floating rates are cheaper


    expensive. Generally 1-2 % initially as compared to fixed
    higher rate is charged as interest rates.
    compared to floating rates. • There is no pre-penalty
    • Banks impose pre-payment charged on floating interest
    penalty upto 2% in fixed rates. rates.
    • Stable but involves higher cost • Higher risk involved due to
    as compared to floating fluctuations in interest rate.
    interest rate.
    HOW TO CHOOSE BETWEEN BOTH ?

    Depending Upon Future  Inflation is at Bottom

    Predictability Go For Fixed  Economic Slowdown

    Interest Rate When -  Lower Interest Rates

    Depending Upon Future  Inflation is at Peak


    Predictability Go For Floating  Economic Boom
    Interest Rate When -  Higher Interest Rates
    THANK YOU FOR WATCHING

    DEVTECH
    FINANCE

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