E-mail :

Password :

Forgot Password? | Sign up for Free

Should You Use A Floating Rate Personal Loan?

Posted by : Premraj | Posted on : Monday, August 20, 2018


Saving for rainy days is a safe way to be prepared for any unforeseen emergencies. Otherwise, you might potentially find yourself in tricky situations if you cannot offset the costs that an unexpected emergency comes tied with. Unfortunately, sometimes having rainy day savings isn’t enough, and applying for a loan can be the best alternative.

Luckily, with the rate at which lenders compete for borrowers nowadays, it can be quite easy to land a personal loan at a favorable interest rate. While landing a loan might seem easy, choosing between the different loan options and policies can be baffling. One choice that leaves most borrowers in a dilemma is the choice between floating and fixed rate loans.

Here’s a guide to help you make an informed choice:

Fixed Vs. Floating Loan Rates

The lending industry has evolved to the point that lenders can offer you easy approval installment loans for bad credit, but the trick comes in the type of rate that they can offer you. Fixed rate loans have a predetermined rate that remains the same throughout the life of the loan. The only time that the rate can change is if you were to refinance the loan.

Floating rates tend to be the complete opposite. You will first start with a specified percentage as your current rates which will change with time throughout the life of the loan. The rate can either go up, down or stagnate depending on a variety of factors.

What Type of Loans Encourage Floating Rates?

Most loans will tend to use a fixed interest rate, but they also give room for floating rates. For instance, in mortgages, the floating rate option is called an adjustable rate mortgage (ARM). Some personal and business loan lenders might also allow floating rates. Either way, the concept is that the rate of all allowed loans will change to adapt to the current market interest rates.

Why Use A Floating Rate?

Lenders typically include a prepayment penalty in loan policies that govern fixed rate loans. This means that you cannot pay your loan in a lump sum without paying off the fine. On the other hand, loans that have a floating interest rate allow the user to pay off a lump sum of the loan at a go.

When the current market interest rate is doing great, the borrower wins. This means low rates which result in reduced monthly payments. Combining the factor of reduced monthly payments and no prepayment penalty simply means that a borrower can pay down the loan quite easily, especially when the market rates favor them.

Why Stay Away From Floating Rates?

The fate of your loan repayment amount lies solely in the hands of the current market trends. If interest rates were to increase suddenly, then you will have to make bigger monthly payments. While there are cases when the rate is close to the relative fixed rate loan, in other cases, the rate will soar higher than the fixed rate loan.

Comments : Post a Comment | Category : Loans | Tags :

If you’re thinking about Less-than-perfect Credit, this write-up is exactly what you must have been looking for. You just have a look at it to substantiate the claim. How to Find Appropriate Debt Consolidation Loans? People sick and tired of searching the pool of financial debt will certainly look for debt consolidation funding solutions. Many […]


As the name implies, term life insurance provides benefits for a specific term, usually a few years. After that, the policyholder must renew the policy. Term policies are usually much cheaper than whole life, which is the other major type of life insurance. Such policies provide coverage for a lifetime. Whole life policies also build […]


Building up an investment portfolio is a fantastic way for you to boost your income and change your finances for the better. In a short amount of time, you have a chance to turn your life around and access funds that you could previously only dream of. However, it will be impossible for you to […]


North West of England provides a robust property market for potential investors and buyers considering their next purchase location, serving a more economically secure contrast to the cities sitting in the South of the country. Hometrack, a company who collate statistics from house price trends have analysed the latest house price index across 20 cities […]


Veterinary Care Financing Options

Debt is a serious problem for most Americans. From student loans to mortgages to car loans, there’s always some form of debt that we have to go into to make our way through life. But, as debt starts to pile it, it can become unmanageable, especially when you’re dealing with multiple creditors and high interest […]


For new lawyers, the idea of ​​simply declaring oneself open to business and going out to look for individual clients can be intimidating. Fortunately, there is another way to start: you can practice as a freelance lawyer, where instead of working directly for the clients that hire you, you will work for other lawyers, doing […]


Before choosing the assistance of a home loan company, you have to first carry out a simple analysis about the market gamers and the industry itself. Have a look at these 4 elements you need to consider while looking for any home loan lender: Professionalism and Reliability A myriad of client-services businesses should practice professionalism […]


Purchasing car insurance is the wise thing to do. Nonetheless, it is not simple to find the right insurance policy. There are numerous companies and offers available and you have to compare them before you make a choice. Your insurance should be affordable, but you also have to pay attention to various factors such as […]


Budgeting is one of the single best things you can do to get your personal finances in check. Budgeting is all about making sure you know how much money you have coming in, how much you have going out, and where it is all going. However, if you are like one of the millions and […]


Hiding your money under a mattress but want something more secure? Have you started a new job and need a financial institution for your direct deposit? Or perhaps you’re dissatisfied with your current bank and want to find a better company to work with? Whatever the case is, there are literally thousands of options to […]


Free Budgeting software to better manage your money

Register for FREE, Learn More or Watch the Video