Renu Sud Karnad

I read an article in Mint where one of your company’s officials was quoted as saying interest rates have stabilized. There is also a buzz that interest rates may come down. Do you think it’s time to go for a floating rate of interest?

Interest rates seem to have stabilized. In fact, in the medium term, we foresee they may soften. It is something that will not happen overnight, but over six to eight months. You may choose to take your loan at a floating rate of interest, as the difference between the floating and fixed rates is large. Moreover, very few lenders offer pure fixed rates. However, it is important that you evaluate your risk appetite and long-term financial commitments before finalizing. There are also options which allow you to split the loan between fixed and floating rates of interest.

I am part of the senior management in a mid-sized company. I had taken a loan at a floating rate of interest. It was to end in January 2008, but was extended. The retirement age at my company is 58, so my loan continues beyond my retirement, due in June 2008 (though I plan to continue working as a consultant). Do I have to close the loan before I retire?

In the normal course, one is expected to complete the loan liabilities before retirement. This is to ensure there is no financial burden on the person/family after the regular stream of income stops. However, in cases where there are sources of steady income post-retirement, such as pension, a slightly longer term can be considered.

Renu Sud Karnad is joint managing director, HDFC.Readers may write in with their queries and comments