Fixed EMI personal loans: Key pros and cons you must know before borrowing | Mint

With interest rates on loans continuing to fluctuate due to the ongoing geopolitical issues, fixed equated monthly instalment (EMI) personal loans have become a go-to option for many aspiring borrowers in the country.

Provided by leading financial institutions such as HDFC Bank, ICICI Bank, IDFC First Bank, Kotak Mahindra Bank among others, these personal loans come with the comfort of consistent monthly payments.

Still, like any other financial product, fixed EMI personal loans have both advantages and limitations. Keeping this in mind, five key pros and cons to consider before opting for such loans are as follows:

Pros of fixed EMI personal loans

1. Predictable monthly outflow: In this particular personal loan product, your EMI stays the same throughout the entire tenure of the loan. This happens regardless of market conditions. Now this simple feature helps in budgeting and long term financial planning. Especially for salaried professionals or first time borrowers.

2. Immunity from interest rate hikes: With consistent policy amendments by the Reserve Bank of India (RBI) there is always a risk of rates either rising or falling depending on the economic decisions. The current repo rate is 5.5% after the most recent meeting on June 6, fixed loans in such cases protect you from sudden EMI hikes, unlike floating rate loans that react to market changes.

3. Peace of mind: Financial burden is reduced when you as a borrower know your EMI’s won’t be impacted with frequent changes in economic policies. It simply adds psychological comfort, clarity and particularly for families managing multiple obligations such as home loans, school fees or medical costs.

4. Ideal for long term tenures: If you are aspiring to opt for a personal loan of 5 to 7 years, then fixed rates offer stability throughout the period of the loan repayment process regardless of external factors and implications on interest rates.

5. No surprises in loan servicing: You will never face problems such as fluctuating EMIs, interest recalculations, changes in amrotisation schedules among other related complications. This will make your repayment tracking and loan closure strategy easier and seamless.

Cons of fixed EMI personal loans

1. Higher interest rates: Financial institutions might charge a premium for fixed rates. It is often as much as 1.5% to 2% higher than floating loans. This can result in a significantly higher total repayment amount.

2. No benefit from rate cuts: Now in cases where the RBI slashes rates or the market cools down, floating rate borrowers pay less whereas fixed rate borrowers miss out on such opportunities. You are simply locked in irrespective of external conditions.

3. Prepayment penalties: Several banks and financial institutions charge 2-4% foreclosure or prepayment fees on fixed rate personal loans. This is done to discourage early closure or refinancing until and unless you are ready to absorb the extra cost.

4. Less flexible terms: Switching to a floating rate mid loan generally requires a loan conversion or refinancing. Such a change can only take place with proper documentation and associated charges. Fixed loans are not ideal if flexibility is your priority.

5. Not ideal in a falling rate cycle: In situations where the economic condition softens and repo linked rates dip by a large margin. As seen recently in June 2025, when the RBI reduced the repo rate by 50 basis points. Borrowers in such situations might feel stuck paying more than necessary.

Note: The interest rates discussed above are indicative in nature. On an individual basis these rates depend on several factors such as creditworthiness, credit scores, repayment history. For the updated rates, terms and conditions refer to the official website of the respective financial institution or discuss with the designated customer service representative.

Hence a fixed EMI personal loan can be a fairly reasonable choice. That too if certainty, discipline and protection from volatility matter the most to you. Still, a decision to opt for a particular loan product should only be taken after checking your credit score, credit profile along with proper consideration and consultation with a certified financial advisor.

To make things easier for yourself you can use personal loan EMI calculators, review your credit profile consistently and compare prepayment clauses of different financial products before considering any particular loan product.

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