What is a fixed vs. variable interest rate for personal loans?

When considering a personal loan understanding the distinction between fixed and variable (floating) interest rates is crucial for effective financial planning. A fixed interest rate means the rate agreed upon at the outset remains unchanged throughout the entire loan tenure. This makes sure that your EMI stays constant from the first month to the last which can be helpful for budgeting and financial predictability. Fixed rates are particularly suitable for people who prefer stability and do not want surprises in their monthly expenses.

Whereas a variable or floating interest rate is subject to change during the loan period. The rate fluctuates in response to shifts in broader economic conditions, such as changes in the Reserve Bank of India’s repo rate or other market benchmarks. When market rates decline your EMI may decrease, potentially resulting in savings over the loan’s tenure. If rates rise then your monthly repayments can increase which may impact your budget. Floating rates are often linked to benchmarks like the MCLR or the repo rate making them more responsive to market dynamics.

Most personal loans has fixed interest rates, offering borrowers the advantage of consistent repayments. Personal loan interest rate usually starts from around 10%* per annum though the actual rate depends on factors like your credit profile and the lender’s policies.

Before choosing a loan it is very important to verify whether the rate is fixed or variable as this will directly impact your repayment strategy and overall financial comfort.

Disclaimer: Personal loan interest rates are subject to change depending on your credit profile as well as the lender’s policies.