Q ) What is the difference between fixed-rate and floating-rate interest on car loan?

A )

Fixed Interest Rate:

Fixed Interest Rate allows the repayment in fixed equal monthly installments over the entire period of the loan. The interest rates in such a case are fixed and don’t change with market fluctuations. Thus the borrower knows the exact amount he needs to pay in the future or at least he knows the exact interest rate to pay for the outstanding loan at that time.

Floating Interest Rate:

Floating interest rate, which is also referred to as variable or adjustable interest rate is any debt instrument that does not have a fixed interest rate. The time period for a car loan plays an important role in deciding this fixed percentage. The borrower decides the time period and the lender charges the interest rate accordingly. This period generally ranges from 1 month-7 years.