What happens if interest rates rise after I take a fixed-rate loan?

If you take a fixed-rate personal loan, your EMI stays the same for the entire loan tenure, regardless of any rise in market interest rates. This stability makes it much easier to plan your monthly budget, since you know exactly what you’ll pay each month. The RBI has kept the repo rate steady due to inflation risks, and lenders have already raised rates for new borrowers. If rates go up further, your fixed-rate loan remains unaffected. This can be a real advantage, especially when interest rates are climbing, as your repayments won’t change while new borrowers face higher EMIs.

On the other hand, if market rates drop after you’ve taken your fixed-rate loan, you won’t benefit from lower EMIs unless you refinance the loan, which may involve additional fees or a new application process. Some lenders do allow borrowers to switch from fixed to floating rates or vice versa at certain points during the loan tenure, but this usually comes with a fee. Always check your loan agreement for details on switching options or penalties.

Fixed-rate loans are a good fit if you value certainty and want to avoid surprises in your monthly outgo. In a rising rate environment having a fixed-rate loan can actually save you money over time compared to new borrowers who face higher rates. This predictability is especially helpful for managing household budgets and long-term financial planning.