Interest rates are one of the most important factors affecting the total cost of a loan. Whether you’re taking a personal loan, home loan, or car loan, understanding how interest rates work can help you save money and avoid surprises. This article explains the types of interest rates, how they impact your repayments, and tips to get the best deal.
An interest rate is the percentage a lender charges you on the loan amount for borrowing money. It is usually expressed as an annual percentage rate (APR). The interest is how banks and financial institutions earn profit and covers the risk of lending.
A fixed interest rate stays the same throughout the loan tenure. Your monthly EMI remains constant, making it easier to budget. However, fixed rates might be slightly higher than variable rates initially.
A floating rate can change over time, usually in line with market benchmarks like the RBI’s repo rate or LIBOR. Your EMI may increase or decrease depending on these changes, which means less predictability but sometimes lower rates.
The higher the interest rate, the more you pay over the loan’s life. Even a small difference in the rate can add thousands to your total interest payable.
Our Loan Calculator lets you input different interest rates and tenures to see how they affect your EMI and total interest payable. This helps you make informed decisions and choose the best loan plan.