Loan repayment options

Life 365    05-Apr-2020
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THESE DAYS HOME loan companies are offering many customized repayment options to suit the borrower’s loan requirements. Some of these plans can even increase the repayment capacity of the borrower along with many conveniences
  
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Today, we bring you a compilation of loan repayment options you can use. We weigh their pros and cons to tell you which one serves you well and in what capacity.
 
Bank’s suggestion
This is the option you get when you seek a loan. The bank tells you the interest rate, lets you choose the tenure and hands you the breakup. This is the easiest method to repay the loan. After all, all you have to do is walk a straight line. In the coming few years, your loan will be over and till then, you have to make timely payments. However, it is the best option for those in government jobs. Few people leave their government jobs and hence, their income flows never stops. This is exactly what is needed for this type of repayment option.
 
Part or full prepayment
 This is the most alluring option here. All you have to do is save money while repaying the loan. Then, you make a big prepayment towards your loan and reduce the principal substantially. This way, your loan’s interest amount also comes down. However, the problem is the bank’s prepayment clause. This can not just affect your loan amount but its tenure too. Also, since banks provide loans on the rate of interest that can change in the future, do factor that in your decision.
 
Increasing EMI amount
Instead of paying a fixed EMI for the repayment tenure, you can increase your EMI amount when you wish to. What this does is reduce your loan amount by a bit while taking care of the interest. Reducing loan amount means less repayment tenure. You can call it part-prepayment. However, you will have to keep eye out on the prepayment clause in the loan. Certain banks limit the prepayment amount to a limit. Also, do look out for prepayment charges that may be levied. Due to these charges, you may have to pay more than what you planned for.
 
Waiting it out
The last option in our list of loan repayment options is waiting it out. The financial market is an ever-changing one, just like any other market. So, chances of interest rates coming down always exist. If the interest rates fall a year later, it will result in less financial burden on you. In essence, not just your loan amount but tenure will reduce too. This will happen without you even having to look for additional finances. But it is a double-edged sword. If the interest rates increase in the future, you will have to pay higher EMIs.