What is the difference between prime lending rate and fixed rate of interest?
Prime rate, or Prime Lending Rate (PLR), is the rate of interest at which banks lent to favored customers, i.e., those with high credibility. So if you have very good financial background then the bank will give you loan at prime lending rate which is lower than the interest rate for usual loans. The RBI sets the PLR. It can increase or decrease the PLR as per the economic condition in the country. In loans, interst rate is of 2 types, fixed and floating. Fixed rate is as the name suggests. If it is 10% then it will stay 10% for the full duration of the loan. Floating loan are dependent on the PLR. Bank might give you loan at PLR + 2 % interest. So when PLR is 8% then you will have to pay 10% interest. If RBI increases PLR to 10% then your floating interest rate will also increase to 12%. Check out this Free Ecourse given in this link http://www.invest-in-shares-in-9minute.c… , it is quite g
