NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Debt Management and Loans
Rohit Menon has a floating-rate home loan of Rs 40,00,000 and keeps his EMI unchanged when the lender raises the interest rate. What is the most likely consequence?
The loan tenure will increase. With a higher interest rate and an unchanged EMI, more of each payment goes toward interest and less toward principal, so it takes more instalments to clear the loan.
- AThe loan tenure increasesCorrect
- BThe loan tenure decreases
- CThe outstanding principal is reduced immediately
- DThe EMI is automatically recalculated and nothing else changes
Explanation
If the rate rises and the EMI is held constant, a larger part of each EMI goes to interest and less to principal, so repayment takes longer. The tenure therefore extends. The principal does not fall faster.
Did you get it right without looking?
One question tells you little. A timed set on Debt Management and Loans shows your real accuracy, how long you take and where you lose marks.
More Debt Management and Loans questions
- Caselet: Meera has an outstanding home loan of Rs 40,00,000 at a floating rate of 9% p.a. with an EMI of Rs 36,000. Her bank's external benc…
- Under the usual lender practice for personal loans, which statement about prepayment of a floating-rate term loan taken by an individual is …
- A credit score such as the CIBIL score is primarily used by lenders to assess which of the following?
- Which statement about prepaying a floating-rate home loan taken by an individual borrower is correct as per RBI directions on prepayment cha…
- Which of the following best describes a 'balloon' repayment structure in a loan?
- Which of the following is generally considered the most expensive form of consumer credit for a borrower who does not pay the full statement…