We all know that personal loans are very useful for people who need some urgent money. However, most people don’t know that the same personal loan can be taken on two different types of interest rates. Today in this article we will talk about Understanding the Different
Types of Interest Rates for Personal Loan
What is it?
As the name suggests this is a very rigid type of interest rate. In this type of Interest rate, there is no change in interest rate after the passage of time. For example, if you have taken a personal loan for 15 years and the monthly rate of interest on it is 9 percent then the interest on the loan will always remain exactly 9 percent and it will not change according to the market.
EMI and Loan tenure
Just like the interest rate, the EMI in fixed-rate type personal loans also remains fixed throughout the years. And since the EMI and the rate of interest remain fixed, the loan tenure also remains fixed.
Many times it happens that people get tired of paying the EMI every month for a long duration personal loan. Therefore when they find the chance to get a good amount of money, they want to pay all the debts altogether with a single prepayment. However, in the case of fixed-rate personal loans, you don’t get this facility. Therefore if you take any fixed rate personal loan and want to finish it with some prepayment, you may have to pay almost 2 percent extra money than the total money.
If we compare the interest rate of fixed-rate type personal loans, it is usually kept more. Thus with the change in time, no change is going to come in your monthly interest rate which is already higher than the floating rate type of personal loan.
Lock-in is one of the very useful facilities provided in the fixed-rate type personal loan. In this type of personal loan, you can keep your loan at a fixed rate and then after the rate changes as per the rules of the floating interest rate. In this loan, you have chosen that your interest of loan will remain fixed for up to 2 years and then it will change according to the rules of the floating interest rate. It means the rates of your loan interest may increase or decrease after two years depending on the market trend. These types of facilities you can also find in Singapore Cash loan. There from you will also get some more benefits which you would not find anywhere else.
What is it?
This is one of the very special types of personal loan rates which you can also find in Singapore loans. In this type of loan, as the name suggests, the interest rate keeps changing as per the market rules and trend. So it’s a risk also to take the loan with this method yet people go for it. This loan is very useful for the people who are searching for Personal loan for low-income earners Singapore. With the help of this loan, people can start paying their first EMI with low interest. Though it is a loan full of risk, in Singapore loans, you will find this type of loan mostly on the low-interest rate which mostly remains lower than the fixed-rate even after getting some changes into it.
EMI and Loan Tenure
As we noticed above too that this type of loan is full of risk and as the name suggests, everything here keeps changing as per the market trend with the passage of time. Here the banks keep mainly two rules for the people according to their age group.
In the first case, the EMI is kept fixed when the age of the loan receiver is between 21 to 40. In the case of increasing the EMI, the banks increase the loan tenure with the increase in interest rate. This is so as the banks think that people who are under the age of 21 to 40, get more years to work and they can handle the extended loan tenure very easily.
On the other hand, the situation remains not the same when the age of the loan receiver is more than forty years. In such cases, instead of keeping the EMI fixed, they keep the loan tenure fixed, as they think that people more than 40 years old have less number of years to serve. Therefore they won’t be able to handle the EMI properly when the loan tenure would be extended.
Here in this case of interest rate, you would get the facility of prepayment also. This means if you want to clear your debts earlier by giving full payment altogether, you can do that without any burden of extra payment.
The Interest rates, in this case, is mainly kept lower than the fixed-rate type personal loan plan. However, for old customers, the loan rate may remain a bit higher than the loan rate for new customers. This difference may be between 0.25 percent to 5 percent somewhere.
A Lock-in facility is also available here in this kind of personal loan. When you keep your loan at a fixed rate your loan rate doesn’t increase much and the difference between the new customer’s interest rate and your interest rate remains the least.
With the above discussion, you must have gotten a very clear difference between the two types of interest rates of the same amount of personal loan. Now if you want to choose any type of personal loan, you can easily choose. If you want to get the maximum benefits in both cases, you must go with Singapore personal loans.