Flexible Repayment Options Of Loans

span>Share:Borrowers must be aware that most lenders offer a variety of repayment options. A flexible repayment scheme helps the borrower select an option that best suits his needs. In essence, it reduces the EMI burden and minimises chances of default. Here are a few popular repayment schemes:

Step-up and step-down

Step-up loan is tailor-made for borrowers who are in the initial stages of their careers. Here, the EMIs due to the lender vary as the years pass. It is lower in the initial years, and it gradually starts increasing. The lender also sanctions the borrower a greater loan amount, keeping in view his growth potential.

In step-down loans, the EMIs are high during the initial years and come down as the years roll by. This scheme is best-suited to borrowers close to their retirement who may be currently earning good money. But their income levels could drop towards the end of the loan tenure.

Accelerated repayment

Here, the borrower is allowed to increase his EMIs whenever his income goes up. His payment is apportioned against the principal outstanding that helps clear a long-term debt faster. When the disposable income of the salaried class goes up with an increment or bonus, they can make accelerated repayments towards their home loans. Making part prepayment helps save on the interest component of the loan.

Balloon repayment scheme

In the case of this scheme, the borrower has the option of paying a lower EMI in the initial years. Just as a balloon swells at the top, a balloon payment of around 30 to 40 percent of the loan amount must be made in the last installment. Flexible repayment options might enable you to borrow more since the EMI repayments become convenient. However, borrowers must borrow only as much as is actually required.

by: Dealfor Loans

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