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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

Auto finance fortunes are linked to the automobile industry which had plant closures in the June quarter
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Bindisha Sarang   
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

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First Published: Jan 19 2023 | 9:52 PM IST

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