We are all aware of Home loans available in the market with fixed and floating rates. Fixed rates are uniform rates charged/payable over the loan tenure – period for which the loan has been taken. But few understand floating rates. Under the concept introduced by banks, interest rate levied on the home loan is linked to the PLR – Prime Lending Rate (which is soon going to be replaced by the ‘base rate'- to be ascertained by RBI) of the bank or other financial institution (NBFC – Non-banking Financial Institution). Changes in the economy, depending on various macroeconomic parameters, tend to affect the cost of funds of the lending organization. These consecutively affect the PLR thus the interest rate. After a change in PLR, some lenders reset the rate once in every three months, while some others reset it on the first day of every calendar quarter. (This varies from bank to bank).

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