Fixed vs floating interest rates: which to choose
Fixed rates buy certainty at a premium. Floating rates track the repo rate and reprice as policy moves.
5 min read
What you need to know
Since October 2019 most retail floating loans in India are linked to an external benchmark, usually the RBI repo rate. When the repo moves, your rate moves within the next reset cycle, and lenders normally adjust the tenure rather than the EMI.
Fixed rates typically sit 100-200 basis points above the equivalent floating rate. You pay that premium for predictability. Also note that RBI's nil-foreclosure-charge rule for individual borrowers applies to floating-rate loans, not fixed ones.
Continue your research
Use this guide alongside our product details and eligibility criteria before choosing a lender.
Detailed comparison
| Factor | Fixed rate | Floating rate |
|---|---|---|
| Typical pricing | 100-200 bps higher | Lower entry rate |
| EMI certainty | Fully predictable | Resets with the repo |
| Foreclosure charges | Usually 2-4% | Nil for individuals |
| Best for | Short tenures, tight budgets | Long tenures, falling rate cycles |
Frequently asked questions
What is the main takeaway from “Fixed vs floating interest rates: which to choose”?
Fixed rates buy certainty at a premium. Floating rates track the repo rate and reprice as policy moves.
What should I check before acting on this loan basics guide?
The guide includes a fixed vs floating at a glance comparison covering Factor, Fixed rate, Floating rate.
Can the information in this guide guarantee loan approval?
No. It is general educational information. A bank or NBFC makes the final decision after checking your credit profile, repayment capacity, documents and the applicable product policy.
How can iFINTRUST help after I read this guide?
An iFINTRUST advisor can review your requirement, explain the documents normally requested and help you compare suitable lending options before you apply.