What are Fixed Interest Rate Loans and Floating Interest Rate Loans?
The loan on which interest payable is fixed and also remains constant during the tenure of the loan is called as fixed interest rate loan. In this case, liability of borrower is fixed during the tenure of the loan.
The loan on which the interest payable is reset at pre-determined intervals is called Floating interest rate loan. Floating interest rates are tied to a base rate plus a floating element thereof .In this case, liability of borrower fluctuates during the tenure of the loan and borrower requires to pay more interest than what he/she might have planned at the time of taking the loan.
Example of Fixed Interest Rate and Floating Interest Rate Loan
Example of fixed interest rate loan: A loan of Rs. 1000 @ 10% interest for 5 years. It means an interest rate of 5% will be carried all through 5 years.
Example of floating interest rate loan: A loan of Rs.1000 which has to reset at every six months and carries a floating rate of PLR + 0.5%. It means borrower will pay 10.5% interest for first 6 months if the PLR is 10% and After 6 months, if the PLR is hiked to 10.5%, the interest charged to the loan account becomes 11%.
Difference between fixed interest rate and floating interest rate loans
|Fixed Interest Rate Loans||Floating Interest Rate Loans|
|Interest rate remains fixed during the loan tenure.||Interest rate fluctuates during the tenure.|
|It is good for the person with fixed budget.||It is not good for the person with fixed budget.|
|It gives certainty and security to the borrowers.||It does not give the sense of certainty and security to borrowers.|
|It has even nature of monthly installment.||It has uneven nature of monthly installment.|
From the above discussion we could say that fixed Interest rate loans are better than the floating interest rate loans.
Benefits of Fixed Interest Rate Loan
- It gives certainty and security to the borrowers.
- It is good for the person with fixed budget.
- It has even nature of monthly installment.
Name of the company, you should opt to take the fixed Interest Home Loan
PNB Housing Finance Limited (PNBHFL) is an old and best housing finance company in India, which had commenced its operations on November 11, 1988. PNBHFL is a subsidiary of Punjab National Bank (PNB) ,a leading public sector bank in India.
PNB Housing Finance Limited offers fixed interest rate home loans @11.00% for next 10 years, no other bank or housing company in India is offering fixed interest loan for a period of 10 years. If you take the example of HDFC, ICICI they all are offering the fixed interest for the period of 2 years only.
PNBHFL provides housing loans to individuals and corporate bodies for construction, purchase, repair and upgradation of houses. It also provides loans for commercial space, loan against property and loan for purchase of residential plots.
Conclusion: One should go with fixed interest rate loan & PNBHFL seems to be best home loan finance company in this category.
To know more about the PNB Housing Finance Limited (PNBHFL) & its home loan products visit: http://www.pnbhfl.com/index.aspx