Easy availability of housing loans from financial institutions has made it easy for buyers to purchase their dream home. However, it’s important to remember that home loan is a multi-year commitment that entails paying EMIs for a long period, often stretching for 10 to 15 years and even more.
Thus, it’s essential to chalk out a repayment strategy beforehand so that you don’t end up compromising on vital financial goals. Today, lenders offer customised home loan payment plans to ease the burden of repayment. Read on to know more about these plans on offer.
Delayed EMIs
This type of repayment plan allows you to delay your home loan EMIs by a few months. Also known as the moratorium period, you get space and flexibility to get your finances in order during this time. This period varies across lenders and can range from 3 to 6 months. Note that once this period ends, you need to pay the EMIs as per the agreed terms and conditions.
Thus, you must make judicious use of the home loan moratorium period to set your finances right. This is because defaulting on EMIs after this period can attract a penalty and impact your credit score.
Part-prepayment Plan
Under this plan, you can make part pre-payment towards your housing loan. For instance, on receiving a bonus, you can use it to repay a certain portion of your home loan. Note that part-prepayment not only helps you to repay the loan faster and but also save on the interest paid.
Part-prepayment may come at a cost. This is because the lender is forgoing an interest he would have otherwise earned, if the loan was paid as per the original tenor.
Construction-linked Plan
As the name suggests, payments under this plan are linked as per the progress in construction of your home. Here, usually, the first 2 to 3 EMIs are paid on a fixed date, while the rest is paid when construction reaches at pre-defined milestones.
If you can’t commit to regular EMIs, you can opt for this plan. You can use the time taken for completion of each phase of construction to arrange the requisite funds for paying the EMIs.
Repayment with Fixed EMIs
The traditional payment option, home loans with fixed EMIs entail paying a pre-determined amount every month till the end of the tenor. Generally, home loans opted on fixed interest rates allow you to do so.
While opting for this repayment scheme, it’s essential to watch out for the loan tenor. This is because a loan with a high tenor may lower the EMI amount, but pushes up the interest outgo. On the other hand, a loan with a lower tenor increases the EMI but keeps a tight lid on the interest flow.
Repayment with Increasing EMIs
This is another home loan payment plan that you can opt for. In this type of plan, the EMIs are low in the initial years of the tenor. With time, the EMIs increase. The advantage of this repayment plan is that it helps in repaying the loan faster. Also, it enables you to avail a bigger loan amount.
Note that the scheme is linked with the expected growth of your income in the future. In case it happens, it’s easy to pay the EMIs. However, if it doesn’t then it can be difficult to manage the high EMIs in the subsequent years.
Repayment with Decreasing EMIs
This repayment plan is exactly opposite to the one mentioned above. Here, the EMIs are on the higher side during the initial years. However, they come down with time.
It’s important to note that during the initial years, with high EMIs, the interest component of the EMI is higher. This comes down once the EMIs start decreasing.
Along with analysing home loan offers from lenders, it’s equally important to figure out the EMIs. You can easily do so with the help of an online EMI calculator.
