In today’s time, buying their own house is everyone’s dream, but the rising prices of property make it difficult. In such a situation, many people fulfill this dream by taking a home loan from the bank. If you are also planning to take a home loan, then it is very important to know that you get a chance to choose from three types of interest rates. Understanding these three can prove beneficial for you.
Fixed interest rate
As the name suggests, in a fixed interest rate, the interest rate remains the same during your entire loan term. There is no change in it. Its biggest advantage is that your monthly EMI also remains fixed, so that you can easily manage your budget. If you feel that interest rates may increase in the future, then this option is the safest for you.
Floating interest rate
In a floating interest rate, your interest rate may change over time. These rates depend on the policies of the Reserve Bank of India (RBI) and market fluctuations. This means that if the interest rates in the market are low, then your EMI will also be reduced. But if rates rise, your EMI will also rise. This is better for those who are taking a loan for a long period and can keep an eye on the market situation.
Hybrid interest rate
A hybrid interest rate is a combination of both. In this, interest rates are fixed for the first few years of the loan, and after that, they become floating. This is a good option for those who want to keep the EMI stable in the beginning but later want to take advantage of the favorable market conditions.
Which rate is best for you?
Which interest rate is best for you depends on your individual situation. If you want stability in EMI and do not want to take a risk, then choose a fixed interest rate. If you are taking a loan for a long period and the interest rates in the market are expected to go down, then a floating interest rate may be better for you. If you want to be carefree in the initial years and want to change later according to the market, then a hybrid interest rate offers a good balance. Assess all options carefully before making your decision.