ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A fixed interest rate loan is a loan where the interest rate on the loan remains the same for the life of the loan. A variable rate loan benefits borrowers in a declining interest rate market because their loan payments will decrease as well.

Detailed explanation-2: -With a fixed-rate loan, your interest rate and monthly principal and interest payment will stay the same.

Detailed explanation-3: -The term “fixed-rate mortgage” refers to a home loan that has a fixed interest rate for the entire term of the loan. This means that the mortgage carries a constant interest rate from beginning to end. Fixed-rate mortgages are popular products for consumers who want to know how much they’ll pay every month.

Detailed explanation-4: -A fixed interest rate implies that the lending rate is fixed for the term of your loan. Typically, fixed interest rates are 1% to 2% higher than current floating interest rates. Fixed interest loans provide a sense of certainty to you as you know the monthly instalments and loan tenor beforehand.

Detailed explanation-5: -In the fixed interest rate scenario, the interest remains constant throughout the loan period irrespective of the changes in market conditions while in the floating interest rate scenario, the interest can decrease or increase depending on market fluctuations.