Are you sure about opting for fixed rate home loan scheme?

When it is comes to choosing between interest rate schemes a borrower has broadly two options to choose from- Fixed or Floating interest rate schemes, however it can sometimes be a bit difficult for a borrower to decide for the home loan scheme he must go for, as both of them have their own limitations, advantages and disadvantages.

As the name suggests that the interest rate under a fixed rate scheme is not variable, that means the interest rate will remain the same for the whole loan tenure no matter how disturbed the market rates be, he will have to keep paying according to the fixed rate.

The above mentioned is the basic contour of a loan borrowed under a fixed interest rate scheme but there are a lot many things that are encapsulated inside and that are very essential for a applicant to know before they have borrowed a loan.

The advantage with a fixed rate loan scheme is that the interest rate is fixed and such a scheme can prove to be a very useful one under the present market situation when the interest rates are constantly soaring. A borrower can then plan his loan very well as then he does not have to take any other factors into consideration and can keep making the repayments at the same rate.

As the interest rates have gone north, a number of modifications had been made applicable that makes it slightly more complicated from what it may look like. The first thing is that the interest rate that the lenders offer is way higher then the market rates as they have to keep it fixed and to make sure that they make considerable profit out of the deal they keep the interest rate pretty high.

Apart from that now most of the lenders have now started to hike even the fixed interest rate after a fixed interval of time that has made such loan scheme far too much expensive. The other disadvantage to this scheme is that it does not allow the borrower to enjoy the benefits of fall in the lending rates.

The borrower gets trapped inside the a bracket of interest rate and thus even when the lending rates are low, he will have to keep paying according to the higher rate applicable on his scheme. So, it is better if a person opts for floating interest rate scheme.