Repaying back home loans is a mountain to climb for most people. These amounts are indeed high and after having possession of the home, you have no time relax.
What about the Finance companies?
Although home financing companies are coming up with wonderful customized payment options the process is not that easy. Beyond any doubt there are flexible ways but many payment options are directly linked with the construction of your house. Thus the process is a sort of win-win for both parties i.e. the lender and the borrower. Practically speaking, there are plans which increase the repayment capacity of the borrower with some tax benefits.
Six golden options
Let’s have a look at the various types of repayment plans existing in the market. One may go through them and analyze on correct terms before finally arriving at a conclusion.
- Step up repayment loan- This is a repayment option that is directly linked to the borrower’s monetary growth. This option provides the borrower a liberty to have higher loan compared to a normal housing loan. Experts opine that this sort of repayment option is particularly suited to young owners. Since, one’s income keep on increasing with the advancement in his career, they can adjust the loan as per their need. One pays lesser EMI in the initial years and can adjust later on in the upcoming years. They can also enjoy tax benefits even if the EMI increases substantially.
- Step down repayment loan- Just the reverse process of step up plan is followed here. EMIs are higher in the initial years and goes down in the upcoming years. This plan can be helpful for old owners. Senior citizens can avail this scheme and the lower repayments in the later years are indeed helpful for them.
- Fixed and flexible installment plan- There are basically two aspects. When the plan is fixed, the EMI is fixed for a certain period. Later on it may get adjusted as per the market rate. One important feature of this plan is that the EMI is constant and does not vary according to the market. It can be of a bliss to the borrowers when interest rates are expected to rise. But one must be careful and check out the terms and conditions, since many lenders keep a provision of increasing the fixed amount at certain cases.
On the other hand, flexible loan repayment scheme involves a higher EMI in the initial years. This decreases though in the later years of repayment. Parents who aspire to buy homes for their children can retort to this scheme as it can be planned in such a way that if they fail to meet the repayment, their children can do it successfully.
- Tranche-Based repayment plan-This type of offer is provided by very few banks and financers. Under this scheme, a borrower can fix an amount as per their ability. They can pay the installments to the bank till the property is all ready for being possessed. The minimum amount payable is the interest on the total loan amount.
- Accelerated repayment Plan-Under this scheme, borrowers can increase the EMI amount when they have means to pull. When there is surplus money or income is high, they can increase the EMI, to pay back the loan faster.
- Balloon Repayment Plan- More or less it is similar to the step up plan. But with a major difference in the amounts of installments that are paid in the beginning of the loan term. The installment amount is initially low and starts ballooning higher in the later years of the loan term.
The plans discussed in detail may be of great help but analyzing your pocket and the market is very important. One must go ahead after judging all the pros and cons when it comes to finance.