If you want to apply for any form of a business-specific credit line, you need to understand the basics of chargeable interest rates. As a matter of fact, lenders usually levy either fixed or variable interest rates on the business loans (https://www.fullertonindia.com/business-loan-interest-rates.aspx), which eventually determines the cumulative sum that is to be paid at the end of the tenure.
In the subsequent sections, we shall take a closer look at the primary differences between fixed and variable rates associated with a business loan:
- Uniformity
Fixed business loans are the ones where a single rate of interest is used to calculate the interest payable during the entire term tenure. However, according to the name, variable rates depend on the Swap Rate, CDR, or any other index while changing multiple times throughout the loan tenure.
- Financial Stability
Variable interest rates are better if financial stability at the onset is your primary concern. In case you choose business loans with floating rates from credible lenders, the initial rates are way lower than the market staple. Although the rates go up after a certain point of time, the initial support allows you to manage startup finances, better.
- Minimal Worries
If your venture is based on a steady model, a fixed business loan interest rate is expected to serve you better. Moreover, you need not take the changing market conditions into account as the interest rate remains the same throughout the tenure.
Both variable and fixed business loans have their share of benefits and advantages, based on the existing financial stead and upcoming growth prospects.
Additional Read: Follow these Easy Steps to Get A MSME Loan
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