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Everything you need to know about fixed rates in India

Personal Finance

Are you worried about the interest rates going up? Then it would be best if you study more about fixed-rate loans. By applying for a fixed-rate loan, you can fix your interest rate. Then you will be able to enjoy a fixed EMI for your loan term.

Fixed-rate loans are best if you want to keep a tab on your EMIs. It also allows you to calculate the interest you’ll pay throughout the loan. If you take a fixed-rate loan, you will also know how much you will repay.  Fixed-rate in India is a loan product where the interest rate is the same for a specific period. 

Fixed-rate loans are meant to be simple and practical. Several banks in India offer fixed loans. It is a popular choice for borrowers who want to lock in a low-interest rate. Read on to learn more about fixed-rate loans.

What is a fixed-rate loan?

fixed-rate loan is a loan that comes with a fixed interest. Experts explain a fixed rate as an interest rate set to stay identical for a loan term. It provides the borrower with an option to forecast their EMIs.

Unlike variable interest rates, a fixed rate is easier to calculate and predict your repayment. Here, the loan is given at a fixed interest rate for a set period. As you know the overall interest cost, you can calculate the EMIs easily. A fixed interest rate is mostly given on instruments like a mortgage, corporate bonds, etc. You will mostly see the fixed interest in percentage per annum.

Fixed-rate loans inIndia are a good option for borrowers who want certainty about their payments. There’s no guessing about your interest rate throughout the life of the loan. There’s no need to make extra repayments or borrow more money to keep up with repayments.

Fixed-rate loans are great if you are looking for a backup to face new financial challenges. It can also help in critical financial situations like buying a house or starting a business.

How does a fixed-rate loan work?

Borrowers are usually most attracted to loans with fixed rates as they do not fancy non-static interest rates during the loan period. It is because there is an increase in the interest payments which will extend to the mortgage fees. With this rate, you can avoid the risks associated with variable interest rates.

When you choose a variable interest rate, it means that the interest on the loan will change periodically. And the change depends on an index or base interest rate, which is uncertain. On the other hand, a fixed rate is always certain, and it stays constant throughout the loan tenure.

It’s easy to calculate the cost overall of a fixed-interest rate loan. All you have to do is put the following into consideration;

  • Amount of the loan,
  • Applicable fixed rate.
  • Loan repayment tenure.

Once you know all these three factors, you can calculate your interest rate.

Advantages and disadvantages of taking fixed-rate loans

Generally, when considering a loan, there are a lot of things you should keep in mind. Some of these things can range from the present economy to when and how the mortgage can be fixed. Fixed-rate loans are mostly favourable to borrowers than lenders. 

Advantages of fixed-rate loans:

Here are some of the known advantages of taking a fixed-rate loan;

  • Predictability: With fixed interest rates, you can predict your monthly loan fees as the payments are static from month to month.
  • Reduced rates: A fixed-interest rate loan comes with low-interest rates which are constant.
  • Costs computing: It is much easier to calculate the lifetime borrowing cost of a fixed-interest rate loan as the cost is always constant.
  • Certainty in interest rates: The fixed interest rates ensure clarity on the expected amounts to be paid, as it is constant.
  • No movement in interest rates: Fixed rates provide protection to the borrower from unexpected increments in the rate. It also ensures that the borrower is prone to market volatility.

Disadvantages of fixed-rate loans

Even though there are numerous advantages from the borrower’s perspective. There are also some disadvantages of taking a fixed-rate interest loan. Here are some of the drawbacks;

  • Higher interest rates: Sometimes a fixed-rate loan may come with a higher interest rate if you compare it with a flexible-rate loan.
  • Dwindling rates: In some cases where there is a decline in the fixed interest rate, you will still be compelled to pay your usual interest rate, which will be higher at the time. 
  • Refinancing: When there is a drop in the value of the interest rates, refinancing from a fixed-rate loan to another or a variable-rate loan can be profitable. Even though it may consume too much time, the accrued gain may be significant.
  • Early payback charge: If you need to exit a fixed loan contract before the expiration of the contract term, you will be charged an early repayment fee. Thus early payment of fixed-rate loans can be expensive. So, you must make this payment only if the savings will be more that the foreclosure fee.


In conclusion, getting a fixed-rate loan in India is very helpful, especially in favourable conditions. Moreover, if you are looking for a reliable source to get your fixed-rate loan, Piramal Finance India is your best option. Piramal Finance offers the best services and plans for fixed-rate interest loans, business and housing loans, etc. They are always ready and available to you. To know more about this, visit their website today. They have many articles and blogs related to the topic which would help you improve your finance skills.