A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.

Fixed Loan

“LOAN IS A SUM OF MONEY GIVEN TO AN INDIVIDUAL WITH THE CONCEPT THAT IT IS TO BE REPAID ON SPECIFIED FUTURE DATE WITH ADDITION OF SOME PERCENT OF INTEREST……..”.

While taking into consideration the fact that global rates are clearly on rise and financial bodies tend to tap overseas borrowings to fund their business (domestic as well as international), moves our mind towards increasing rates of interest in future.

There is one vexing question that all loan seekers address: That whether to go in for a floating-rate scheme or take shelter in a fixed-rate scheme?

SO, taking in view the market situation and risk involved in coming future our analysts believe to adopt fixed loan, and the basic reason behind adopting fixed rate interest loan is that” fixed loan offer you the peace of mind, that your interest rate will remain the same as long as you have your loan, which may be a key concern if you expect to be in safer side throughout your life and like the predictability that a fixed-rate loan can add to your budget. Fixed-rate loans protect you against inflation, because interest and principal payments remain stable for the life of the loan, even when prices or interest rates rise.”

BEAUTY OF FIXED LOAN :

The beauty of fixed-rate scheme loan is that the interest rate charged by a finance company remains fixed throughout the term of the loan, which means that the consumer is immune to fluctuations in interest rates. The risk of rising interest rates is borne by the financing company in this case - a rise in interest rates will not affect your cash flows in any cost. It also offers the advantage of knowing your liability per month (EMI) in advance, which remains fixed throughout the term of the loan, enabling better financial planning, it is a right of every individual to choose the best type and comfortable loan. So, it is advisable to go in for a fixed-rate scheme if one feels that the rate of interest in the market has touched rock-bottom and hence they may have nowhere to go but up.

BEFORE TAKING A LOAN CERTAIN QUESTION GRAB YOUR MIND, LIKE:
• Percentage of involvement of risk
• How long you can pay your installments
• The cash flow you required
• Which is the best option

The solution of all this question is depends on your financial needs and prospectus. Knowing the importance of interest rates is very essential to take up the best and safer step. Besides interest rates , knowledge of market also assist a lot in decision making. Action according to situation will lead to happy life. For an example, A loan in which the interest rate does not change during the entire term of the loan. For an individual taking out a loan when rates are low, the fixed rate loan would allow him or her to "lock in" the low rates and not be concerned with fluctuations. On the other hand, if interest rates were historically high at the time of the loan, he or she would benefit from a floating rate loan, because as the prime rate fell to historically normal levels, the rate on the loan would decrease. And as we know that every part in life has its own pros and cons, similarly fixed rates is also covering a negative part that you do not get benefit from a fall in interest rates. So, even if you earn less on your bank deposits in case rates fall, you will be forced to pay a higher interest rate on your loan.

However in most of the cases like housing loan, student loan, and mostly in mortgage loan, fixed rate of interest is preferred.

Fixed loan has been proved to be best from many years as - the interest rate is fixed or set for a definite and agreed period of time, for example, from 1 year to 5 years. This means that the interest rate never changes in the period. It remains constant no matter what happens to the economy or changes in interest made by the lender. Our experiment has proved that all people who have taken fixed loan are the most profitable and happiest people of life.