Floating rate
A loan interest rate linked to an outside benchmark, like the RBI repo rate, so it rises and falls over time.
A floating rate is a loan interest rate that moves with an outside benchmark, usually the RBI’s repo rate, plus the lender’s margin. When rates fall, you pay less; when they rise, you pay more, or for longer. Most home loans are floating. See how it compares in fixed vs floating interest rates.
Questions people ask
What is a floating interest rate?
A floating rate is a loan rate made of an outside benchmark, such as the RBI's repo rate, plus a margin set by the lender. When the benchmark moves, your rate moves at the next reset, so your EMI or loan tenure changes.
How often does a floating rate change?
For bank loans linked to an external benchmark, RBI rules from October 2019 require the rate to be reset at least once every three months. Check your loan agreement for the exact reset dates.
What happens when my floating rate goes up?
The lender either raises your EMI or keeps it the same and extends your loan. RBI rules require lenders to tell you and let you choose a higher EMI, a longer tenure or a mix, and you can also prepay. Check the current RBI directions.
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