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Fixed vs Floating Loans — Who Benefits from Rate Cuts?

Not all loans benefit from RBI’s rate cuts. If you’ve taken a fixed-rate loan, your EMIs may not change — while floating-rate borrowers could see savings. Here’s a simple breakdown of how each loan type works and what you should consider before switching.

Ankit Maheshwari

• 2 min read
Fixed vs Floating Loans — Who Benefits from Rate Cuts?

When the RBI reduces interest rates, not every borrower benefits immediately. It depends on the type of loan you chose — fixed or floating.

🔒 Fixed Rate Loans

  • EMI stays the same — even if RBI cuts rates
  • Your interest rate is locked for a fixed period (e.g., 3 or 5 years)
  • Banks offer stability but no flexibility during falling rate cycles

🧾 Example:
If you locked a home loan at 9.5% in 2023, and now the market rate is 8.5% — you’re still paying 9.5% until your fixed term ends.

🔁 Floating Rate Loans

  • Interest rate changes with RBI movements
  • Your EMI may reduce when rates drop (like now!)
  • Usually cheaper in the long run, but less predictable

🧾 Example:
With a ₹30 lakh loan at 9.0% (floating), your EMI may now fall to 8.5% — saving you ~₹950/month.

💡 Can You Switch from Fixed to Floating?

Yes, many banks allow you to switch — but:

  • You may need to pay a conversion fee (around 0.5% of loan amount)
  • You’ll need to sign new terms or revisit loan agreements

✅ Tip: If your fixed rate is 2% higher than the new floating rate, consider switching.

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Bitveen.comAnkit Maheshwari

⚠️ Disclaimer:

The information shared in this article is meant for general awareness only. Bitveen does not offer personalized financial advice and is not a SEBI-registered entity. Loan products, conversion policies, and interest rates may vary across banks and individuals. Always consult your bank or financial advisor before switching loan types or modifying loan terms.