Business:  Everyone dreams of having their own house. Home loan plays an important role in realizing this dream. You can fulfill this dream through home loan. Whenever you go to a bank or financial institution to take a loan, you have to select one option between fixed rate and floating rate.

Which of these options should we choose for paying interest on home loan? We should take a decision only after knowing the advantages and disadvantages of both. In this article, we will tell you about the advantages and disadvantages along with the difference between these two (Fixed vs Floating Rate).

Fixed Rate

Fixed rate means that the interest rate will remain the same for the entire tenure of the loan. There will be no change in the interest rate. Apart from this, EMI will also not change.

Understand it like this, if you have taken a home loan at the rate of 8.20 percent for 30 years in which the monthly EMI is Rs 22,000. In such a situation, you will have to pay an EMI of Rs 22,000 per month for 30 years, that is, there will be no change in EMI for 30 years.

One thing you have to keep in mind is that many banks convert the fixed rate into floating rate after some time. You should first confirm the things related to this before taking a home loan.

Floating Rate

In floating rate, the interest rate keeps changing. In this, the interest rate is aligned with the bank's benchmark rates. In such a situation, whenever the Reserve Bank of India (RBI) makes any change in the Repo Rate, the interest rates of home loan change. With the change in interest rates, the EMI also changes. If the interest rate increases but you do not want to increase the EMI, then the loan period increases.

What are the advantages and disadvantages

• In fixed rate loan, the EMI of the loan remains fixed, due to which there is no impact on your money flow in the long run.
• In floating rate loans, the EMI of the loan may also increase due to increase in interest rate. This affects your savings and budget.

In floating rate, problems may arise due to increase in loan tenure or increase in EMI. Whereas in fixed rate, this has no effect. However, even if the benchmark rate falls, the benefit is not available.