For many of us, a home loan is a bonus. It is a significant source of finance that helps us acquire our longed for possession, this is the house of our dreams. A home loan prevails for a considerable period of time, and the timely EMIs never let us forget that we have a liability on our head. But you have the option of change in home loan repayments.
And, here we will tell u all about of this.
Every individual buying a house has a different financial background and thus has different financial requirements. To adapt to the individual needs of home loan borrowers, housing finance companies and banks offer a range of home loan repayments option to suit an individual buyer’s need.
Generally, the home loan repayments option are modified according to a borrower’s capacity to pay equal monthly installments (EMI) at different stages of his productive life. They are planned in a way so as to simultaneously benefit both the borrower and the lender. While deciding on which repayment plan to offer to a customer, lenders usually consider factors like monthly income, stability of employment, age of the customer and any other debts that are being serviced by him. Click here to read about Home loan by Axis Bank
So without further ado, let us look at the various home loan repayments plans:
Step up home loan Repayment
In this plan the repayment is directly linked to the borrower’s monetary growth. It is best suited for those who are in the early years of their employment. This plan allows the borrower to pay lower EMIs in the initial years which steadily increases with each phase along with an increase in the borrower’s earnings.
Step Down home loan Repayment
Here, EMIs are higher in the initial years and decrease later. This plan is most suitable for people who take the loan at an older age, i.e. mostly senior citizens or those nearing retirement. Since the income capacity alters at later stage, the lower repayment helps in keeping your finances within manageable limits.
Fixed and Flexible Installment Plan
In a fixed repayment plan, the EMI will be fixed for a certain period. During this fixed tenure, the EMI is not affected by market conditions.
Contrary to this, in a flexible loan installment, EMI will be varied according to market conditions.
Tranche based home loan Repayment
This option is for those who have taken loans for under construction property.
With the tranche based EMI facility, borrowers decide the amount of EMIs they want to pay until the construction of property is complete. The minimum amount is paid as interest on credit drawn whereas anything above interest goes towards the repayment of the principal amount. This facility is favorable to the borrower as she/he starts paying off EMIs earlier and therefore can repay the loan sooner.
Accelerated home loan Repayment
This home loan repayment system provides borrowers with the option to repay the loan faster by increasing their EMI amounts whenever they have the extra funds which they would like to use towards home loan repayment. In case of an increase in the borrower’s disposable income or in case the borrower has lump sum funds, he can use the increased amount for prepaying the loan. Click here to read about Home loan pre payment option.
Balloon Repayment Plan
This plan is similar to the step up option, but in this option you could pay a very small amount of installments in the beginning of the loan term. As the name suggests, in the later years of the loan term, the installment amount also starts ballooning to a higher amount than the normal step up option.
Although lenders may give you various home loan repayments option as a borrower, you have to ensure that any chosen option does not go against your expectations.
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