Fixed Interest Rate

Fixed Interest Rate
Fixed interest rate is the one in which the interest rate does not change during the rate period where as in Floating interest rate the interest rate does change.
Fixed interest rate home loans permit flat equal monthly payment over the full phase of the loan. In Fixed interest rate, the interest rate does not fluctuate with market rate. In the beginning of the loan period the payments are made towards the interest and the principal amount is paid later.
Advantage of Fixed interest rate: The big advantage is that, since the interest rates are fixed, any deviation in market doest alters the interest rates but that does not raise the fixed interest rates. The borrower continues to pay the fixed Equated Monthly installment. Hence the fixed interest rate home loan is best suited for those who are good at making financial plan and want a fixed monthly payment scheme and brings in a feeling of certainty and safety.
Disadvantage of fixed interest rate: The biggest challenge of fixed interest rate is that the money value is usually more than the floating rate. If due to some cause the interest rates plunge down, the fixed rate payers have to continue paying the same amount and not benefiting the lower rates. The borrower needs to ensure if the loan is fixed for few years or full period of repayment as the borrower would definitely prefer to shift out from fixed payment mode. If the future economy scenario shows rise in interest rates then the fixed interest payment is the good option.

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