These days, home loan firms provide a variety of tailored repayment choices to meet the needs of borrowers. Some of these alternatives provide for loan repayment flexibility, while others are tied to the various stages of home construction. Overall, both the lender and the borrower gain from these plans. Some of these solutions can even improve the borrower’s repayment capacity while still providing tax benefits.
A Home loan with delayed start of EMI Payments
Some borrowers who are unable to pay the EMIs at the start of the loan term may benefit from a home loan in India with delayed EMI payments. This option allows a home loan borrower to start repaying their loan at a later date. Banks like SBI provide this facility. This offers flexi pay, which allows the borrower to pay back the loan over a period of 36 to 60 months. This is known as the moratorium period. The house loan borrower is only required to pay the pre-agreed rate during this time.
Step-down repayment plan
The flexible installment plan is also known as the step-down repayment plan. This plan is designed such that as the loan term passes, the EMI amount due for your home loan reduces. This means that the repayment installments, or EMIs, will be large in the beginning and will decrease in the latter years. To compute EMI payments at various phases of repayment, this plan leverages the concept of reducing the debt. Most of the banks provide home loan calculator tools on their websites for the users.
Step up repayment or home loan with increasing EMI
The step-up repayment plan is designed such that the home loan EMI continues to rise beyond the first few years. This indicates that the EMI will be lower in the first year and will rise after a certain period of time.
This form of loan allows you to get a larger loan amount and pay lesser EMIs in the beginning. However, as the loan term lengthens, the repayment rate accelerates. This repayment plan is suitable for people who require a guaranteed increase in income in the coming years or in the near future.
Home loan with lump sum payment
A borrower is normally obliged to serve only the interest on the loan amount drawn until the final disbursement when purchasing an under construction property. EMIs are due and payable after that. If one chooses to begin principle repayment immediately, he or she may do so by beginning to pay EMIs on the total amount disbursed. The amount paid will be modified first to account for interest. The remaining funds will be used to pay off the loan’s principal.
Balloon payment
A balloon payment is when a house loan borrower pays back about a third of the loan amount in the last payments. A balloon payment is a lump sum payment made toward a loan at predefined intervals, such as five years or at the end of a long-term loan. This repayment plan is only recommended for persons with extreme financial needs. It should be avoided since the borrower will be charged a higher interest rate than with any other loan scheme or plan.
Fixed and flexible installment plan
The EMI for a house loan is fixed for a set length of time or for the entire term under a fixed repayment plan. If it is set for a specific period of time, the EMI is changed at the end of that term to reflect the current market rate. The EMI is unaffected by market conditions during the fixed term and remains constant. Borrowers benefit from a fixed rate payment plan when interest rates are likely to climb in the near future. However, a borrower should be aware that some lenders have provisions in their loan agreements that allow them to increase the fixed amount over time.
A flexible loan repayment option, on the other hand, has EMIs that are not fixed and fluctuate with market movements. When you choose a flexible repayment option, your EMIs cannot be the same for an extended period of time. Depending on the market value, the EMI may grow or decrease.
There are various options available for repaying a home loan. Borrowers can choose their house loan and repayment alternatives intelligently based on their favorable conditions. But many individuals do not take advantage of these opportunities because they are unaware of them. However, keep in mind that choosing your repayment alternatives intelligently can save you a lot of money and help you avoid unpleasant situations.
