Advantages and disadvantages of floating rate loans are:

The advantage is that when the preferential loan interest rate (LPR) decreases, the loan interest with floating interest rate will decrease, so the loan cost of users will decrease. The disadvantage is that when the best lending rate (LPR) increases, the loan interest will increase accordingly, and users need to bear the risk of possible interest increase.

However, even if you choose a fixed interest rate, there will be advantages and disadvantages, so there is no best choice, only the one that suits you best. Users can choose fixed interest rate or floating interest rate.

A floating rate loan is a loan whose interest rate is based on a certain market interest rate selected within a predetermined time interval during the loan period, and then calculated by adding a certain percentage determined by the bank to the basic interest rate, and the interest rate fluctuates with the change of the selected basic interest rate. As the basic interest rate, it can be the rediscount rate of the central bank, the treasury bill rate, the interbank offered rate, the subordinated negotiable deposit certificate rate or other financial market interest rates. 198165438+1October 24th, China People's Bank allowed the interest rate of working capital loans to fluctuate within 20%; The floating range of 1988 was expanded to 30%, including fixed capital loans. However, the basic interest rate of China's floating interest rate is the benchmark interest rate determined by the financial authorities, not the market interest rate.

floating interest rate

Interest rates can be divided into fixed interest rates and floating interest rates according to whether the interest rate level changes during the existence of the monetary fund lending relationship.

Floating interest rate refers to the interest rate that is adjusted accordingly with the change of price or other factors during the loan period. When signing a loan agreement, the borrower and the lender may stipulate that the interest rate can be adjusted with the price or other market interest rates. Floating interest rate can avoid some disadvantages of fixed interest rate, but the calculation basis is diverse and the procedure is complicated.

The method of saving and subsidizing long-term savings deposits in China is a form of floating interest rate system.

Interest rates can be adjusted at any time according to changes in market interest rates. Basic interest rate plus calculation is often used. Usually, the loan interest rate or commercial paper interest rate of the most reputable enterprises in the market is set as the basic interest rate, and on this basis, 0.5 to 2 percentage points is added as the floating interest rate. The principal is repaid at face value at maturity, and the interest is paid at floating interest rate according to the specified interest payment period.

Which is better, a fixed-rate loan or a floating-rate loan?

Many friends will face difficult choices when they borrow money from banks. Which is more suitable for them, fixed-rate loans or floating-rate loans? Today, I will analyze the advantages and disadvantages of fixed-rate loans and floating-rate loans to help you better choose the loan method that suits you.

What are fixed-rate loans and floating-rate loans?

Fixed-rate loan refers to a loan method in which the loan interest rate remains unchanged within the agreed loan period.

Floating interest rate loan refers to a loan method in which the loan interest rate fluctuates within the agreed loan period and is adjusted according to the loan interest rate announced by the central bank.

Advantages and disadvantages of fixed-rate loans

(1) Advantages

In any case, the interest rate of fixed-rate loans is fixed. If the overall interest rate trend is upward, the interest paid by the borrower is lower than the market interest in the same period. When the borrower repays the loan, he only needs to repay the loan principal and interest as agreed in the contract. There is no need to worry that when the interest rate rises, he will not be able to repay the loan in full and on time, thus affecting his personal credit record.

② Disadvantages

If the market interest rate shows a downward trend, the interest paid by fixed-rate loans is higher than that of loans in the same period of the market.

Advantages and disadvantages of floating rate loans

(1) Advantages

Floating rate loans fluctuate with the current market interest rate. If the interest rate falls, the borrower can reduce the interest expense.

② Disadvantages

Which is better, floating interest rate or fixed interest rate?

Floating interest rate and fixed interest rate have their own advantages. Floating interest rate refers to the weighted average interest rate of the remaining 65,438+06 banks after each bank reports the best interest rate in the market every month and deletes a highest interest rate and a lowest interest rate. Compared with the fixed interest rate, the floating interest rate changes with the change of the bank's reported interest rate, and there are too many uncertainties.

If there are 1-6 years left in the mortgage, operate at the floating interest rate, and then repay it in full and on time. Domestic LPR shows a downward trend in five years, which is related to the overall economy of China. All countries are cutting interest rates to stimulate their economies, so the decline of LPR is certain. If the mortgage loan has more than six years left, it will be better to choose a fixed interest rate.

Generally speaking, the advantages and disadvantages of floating interest rate and fixed interest rate are uncertain, and there is no way to evaluate them without considering the environment. Users who have purchased commercial mortgage loans can choose to change it to fixed interest rate or LPR floating tax rate. It should be noted that it will not be changed after selection.

1. Fixed-rate mortgage loan: refers to that the interest rate remains unchanged throughout the loan term. (Please note that the mortgage payment may fluctuate with the change of your property tax or homeowner's insurance, because these expenses are usually included in the loan payment. )

This is the most popular loan type because it provides predictability and stability for borrowers. Banks usually charge higher interest rates for fixed-rate mortgages than ARM, which will limit the housing prices that borrowers can afford.

Second, professional advantages:

1, the interest rate and payment method remain unchanged.

2. Strong stability and easy planning for the future. Homeowners can make clearer financial plans.

3, easy to understand. For first-time buyers, they may not know what 7/ 1 ARM with 2/6 caps means.

Third, shortcomings:

1, if the interest rate falls, the borrower must refinance to get a low interest rate. But the borrower needs to pay the loan fees and costs again.

If you don't refinance the loan, you may pay more interest during the loan period.

3. The loan schemes offered by different banks or brokers are similar. Can't be customized according to the needs of customers.