What are the different types of interest rate available?
- Fixed interest rate :
A fixed interest rate on a loan or mortgage stays at the predetermined rate for the entire term of the loan. This allows borrowers to plan their future payments. Usually personal loans and credit cards have fixed interest rates.
- Floating interest rate :
A floating interest rate fluctuates with the market or along with an index. Floating rates are usually offered for home loans; the prime lending rate or the base rate is used as a basis for calculating the floating rate and the interest rate charged is the prime interest rate/base rate plus a certain spread (as charged by the credit institution).