Banking · Retail Banking Products
A key risk associated with a Floating Interest Rate home loan for a salaried borrower, which a bank employee must counsel them on, is:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Floating rates are generally linked to internal benchmarks which cannot be changed throughout the loan tenure.
- 2The uncertainty regarding future interest outgo and the potential for a prolonged loan tenure or increased EMI if the Reference Rate increases significantly.✓
- 3The interest is compounded more frequently compared to a fixed rate loan.
- 4The interest rate remains static, leading to lost opportunity if market rates fall.
Correct answer
The uncertainty regarding future interest outgo and the potential for a prolonged loan tenure or increased EMI if the Reference Rate increases significantly.
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