Finance · Free tool
Fixed vs Floating Rate
Floating rates are typically 0.5–1% lower at the start; fixed gives certainty. We compare EMI, total interest and savings.
Fixed rate
Floating rate (assumed constant)
Floating saves ₹3,82,833 over the tenure if rates stay flat. EMI is ₹1,595 lower per month.
How the comparison works
A floating-rate loan in India is linked to an external benchmark — almost always the RBI repo rate, since the Oct 2019 RBI mandate — plus a spread of 2.0–3.5%. When repo rate moves, EMI or tenure adjusts automatically. A fixed-rate loan locks the same rate (typically 0.75–1.5% higher) for the entire tenure or a defined initial period. Floating wins when rate cycle is downward; fixed wins when you expect rate hikes or want certainty for budget planning.
Worked example
A ₹50 lakh home loan over 20 years: floating at 8.5% (SBI repo-linked) = EMI ₹43,391, total interest ₹54.14 lakh. Same loan fixed at 9.5% = EMI ₹46,607, total interest ₹61.86 lakh. If RBI hikes 100 bps over the tenure, the floating loan's effective average rate could be ~9.0%, total interest ~₹58 lakh — still cheaper than fixed. Conversely a 100 bps repo cut saves ~₹3,000/month EMI. Most banks allow conversion (fixed to floating) for a ~0.5% conversion fee, useful when peak rates are clearly past.
When to use this
- First home loan — floating is almost always cheaper over a 20-year horizon in India
- Second home / investment property — fixed gives cash-flow certainty for rental yield math
- Near retirement — fixed last few years to avoid EMI shocks on a smaller pension income
- Hybrid (3–5 years fixed, then floating) when expecting rate cut after an initial peak
Pair with EMI calculator and prepayment calculator to see if a partial prepayment beats switching rate type. See also home loan prepayment savings.
FAQ
Why are fixed-rate home loans rarely chosen?
Fixed rates are typically 0.5-1% higher than floating. Banks add a premium for taking the rate risk. Over a 20-year tenure, even small differences compound to lakhs. Floating + EMI buffer (so you can absorb rate hikes) is usually better.
Will the floating rate stay the same as today?
No — that's the whole point. RBI revisions to repo rate flow through to bank lending rates within months. Our calc compares the *current* floating rate to fixed, but reality moves both ways.
Are part-fixed-part-floating loans a thing?
Yes. Some banks offer hybrid products — fixed for 3-5 years, then float. Useful if you expect rates to spike short-term. Read the fine print: many auto-convert at the lender's benchmark, not the rate you assumed.