For personal loan applicants, there are two types of interest rates, Fixed Rate, and Floating Rate, which have a different impact on your monthly EMI. Before we get into the details, let's understand the basic differences between fixed and floating interest rates.
What is a fixed interest rate?
Fixed interest rates mean that interest rates will be adjusted throughout the loan period. Therefore, if a person has taken out a three-year loan, they can be assured that the interest rate will remain adjusted throughout the loan period. This brings the right benefit to some people who believe in making a good budget for their future.
What Is a Floating Interest rate?
Floating interest rates generally mean that interest rates may fluctuate over the course of the loan period due to any circumstances. If you choose an Allahabad Personal Loan with a floating interest rate, then one can be prepared for a change in the interest rate during the loan period.
Pros and Costs of Fixed Interest Rates:
PROS:
- The fees are fixed throughout the loan period so that one can easily plan a financial life.
- In times of low-interest rates, adjusting loans can be beneficial because one can keep interested low as long as prices are very high. This would reduce the interest rate and interest rates for the term, depending on the Credit Provider.
- It is relatively easy to track cash flow and the borrower and the lender are fully aware of the process.
CONS:
- The interest rate at the beginning of a loan is usually higher than the Floating Interest Rate.
- For any reason, if the interest rate drops as a result of changing business or market conditions, a personal loan does not receive a reduced interest rate and one may end up paying about the same amount.
Pros and Cons of Floating Interest Rate:
PROS:
- The initial floating rate is usually lower than the fixed interest rate.
- A lower interest rate means lower EMI. This helps lenders save money on their monthly income. Doing so may favor lenders who intend to save money while completing a personal loan period.
- It gives people an option that people can get depending on market conditions.
CONS
- Interest rates can rise and make the total amount of personal loans more expensive.
- Monthly installments vary slightly due to the ever-changing market conditions.
Who Can Apply for a Personal Loan?
Credit providers set the standard for eligibility for individuals who wish to apply for a personal loan. Some of these conditions include:
- Leading employees and in some cases even people who work with them.
- People at least 21 years of age.
- The minimum monthly interest rate varies from bank to bank but usually starts at grade Rs. 15,000 - 17,000.
- The person must be at work for at least 2 years and a minimum of 1 year with the current employer.
What are the various document requirements to apply for a personal loan?
- A completed and signed loan application form
- Proof of Identity and proof of address
- Proof of income showing the source of the money in the bank account
- PAN card
- Updated Aadhaar card
- Recent bank statement and Salary Slip of the past 3-6 months
- Lease Agreement (if any)
- Photographs
Conclusion:
It is important to determine the type of interest you want to continue with before signing the dotted line because you will not have the option to change it later. Both Floating and Fixed Rate of Interest have their advantages and disadvantages. It is advisable to read both interest rates, resolve all your questions and then make a decision regarding the interest rate you want.
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