Securing Hannav Ledger...
Securing Hannav Ledger...
Glossary
Floating rate loan has interest that varies with a benchmark rate such as repo or MCLR, causing EMI or tenure changes over time.
Floating rate loan EMI can go up or down when RBI changes rates — you benefit when rates fall, pay more when they rise.
Spread over benchmark remains fixed unless renegotiated. Reset frequency typically quarterly or annually. Prepayment penalty generally prohibited on floating home loans for individuals. Rate risk borne by borrower unlike fixed-rate products.
Home loan at repo + 2.5%. Repo 6.5% → rate 9%. RBI cuts repo 50 bps → rate 8.5%, EMI on ₹40 lakh drops ~₹1,200 monthly at reset.
Floating usually cheaper long term with prepayment freedom. Fixed suits if expecting sharp rate hikes and valuing certainty.
Lender policy chooses default adjustment — many keep EMI constant and adjust tenure, or vice versa on rate change.
Some products offer rate cap for fee. Standard floating loans have no cap — full benchmark transmission applies.