Fixed or floating rate? Choose floating-rate car loan if you plan to prepay

With interest rates peaking, you could benefit from a decline in them

Car sales are surging, and so are car loans. According to Reserve Bank of India (RBI) data, vehicle loans grew 22.1 per cent year-on-year in December. Besides getting a good bargain on the car, select the loan carefully to optimise your total purchase cost.

 

Fixed or floating rate?

 

Private banks usually offer fixed-rate car loans while public-sector lenders usually offer floating rates.

 

Gaurav Aggarwal, senior director, Paisabazaar, says, “Fixed-rate car loans are suited for those who prefer a fixed repayment obligation and are content with the current rates.”

 

While fixed-rate loans offer peace of mind, they are usually costlier than floating-rate loans. Also, at