Floating Interest Rate
A floating interest rate is an interest rate that fluctuates over the tenure of a loan, typically adjusted every quarter based on factors like government interest rates, market conditions, and inflation. It is commonly applied to personal loans and home loans. The floating rate is usually calculated by adding a margin to a base rate, such as the Prime Lending Rate (PLR) or the Benchmark Prime Lending Rate (BPLR). As market conditions change, the floating rate may rise or fall, impacting the borrower's monthly payments. This type of interest rate offers flexibility but comes with potential variability in repayment amounts.
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