Hi Saurabh,
When the RBI cuts interest rates, a variable or floating interest rate loan can be more beneficial. Here’s why:
- Lower Payments: With a variable rate, your interest payments will decrease as the RBI cuts rates, leading to lower overall borrowing costs.
- Flexibility: Variable rate loans often adjust in line with market conditions, so you can benefit from any future rate cuts.
- Cost Efficiency: If you plan to hold the loan for a shorter period, variable rates can be cheaper, especially in a declining interest rate environment.
In contrast, fixed-rate loans won’t decrease in interest costs during rate cuts, but they provide stability against rising rates. So, if you’re anticipating falling rates, a variable rate loan would be more advantageous.
Pleasure! Please correct me if I am wrong.
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