Rates loans and their significance:
Fixed interest rate loans are those loans in which the rate of interest is fixed for a certain time. Such loans are beneficial for the people who want to have a secure and predicted future. These loans are specifically given to the people who agree to pay a fixed and high interest rate on the principal amount at the end of the maturity period.
Step 1
The interest rate of such loans is kept high because the lenders perceive that the rate will eventually increase during the fixed period. There are many different kinds of fixed interest rate loans like the bonds, debentures and preferred stocks. Individual can select any of these loans based on their needs and requirements. Individual are advised to go for the fixed-rate loans during the environment of low interest rates because it will lock the interest rate for fixed time and provide a benefit to the borrower.
Step 2
Advantages of fixed interest rate loans:
The fixed interest rate loans are preferred by most individual because it allows them to plan their future perfectly. The individual who opts for the fixed interest rate loans knows about the payment they would be making in the future. This knowledge helps them in budgeting and planning their future accordingly.
Step 3
Moreover, if the people seek that the interest rates will rise in the near future, then they can benefit from the fixed interest rate loans because they offer the loans on current low interest rates, which remain fixed until the repayment.
Step 4
Advice for fixed rates loans:
Before applying for the fixed rates loans, the individuals should study the current interest rate and their future predictions. It has been observed that the interest rates on such loans are not set according to the current market interest rate, rather the market analyst set the rate for these loans by studying the market trends in the future.
Step 5
These rates loans are considered the best option for any individual who wishes to see his future secure and more predictable. Moreover, these loans are also said to be the best choice, when the interest rates in the current market are considerably low and are predicted to increase soon.
However, the individual should conduct a rates loan survey before applying for such loans because comparing the various options will help the individual in making a rationale decision. Furthermore, the terms and conditions of the various rates loans, whether they are fixed or variable should be thoroughly studies by the borrower because they might include some hidden charges or clause that might cause a problem in the future.
Disadvantages of fixed rates loans:
Fixed rates loans are considered a bad option for the borrowers if the current interest rate is high and is expected to decrease in the future. If in this situation, the borrower applies for the fixed rates loans, then they will be obliged to pay the current fixed high interest rates rather the lower future interest rates. Moreover, these loans allow less flexibility to the borrower.
