While there are different repayment options available to banks, it is very important to understand and choose the right one. One of the main points, to consider, is the affordability of the EMI that one has to pay. 

One has to remember that the burden of the committed EMIs should not lead one to borrow more at a higher rate or lead to any delayed payments as this may affect the credit score of the individual.

 

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The different options available in the market are:

Accelerated Repayment Home Loans

This option is well suited to individuals who may have surplus amounts available at different intervals and could use this for speeding up the settlement of the home loan and therefore close the loan faster. Increasing your EMIs could help you save extra interest since the loan closure will be faster.

 

Step-Up Home Loans

This kind of repayment option is best suited for a working professional who has just started his career and expects to see growth in earning over the years. The EMIs in this option increase with time and the growth in earning ensures that the EMIs are affordable as they increase. This option also gives the borrower a higher loan amount as the lender considers the earning and career growth of the borrower.

 

Step Down Home Loans

This option is the reverse of a Step Up Loan. Here the EMIs reduce with time and this option is best suited for someone who is nearing his retirement age. The EMIs in the step down loan option are planned in a way that the EMIs don’t pose a burden on the post-retirement income of the borrower.

 

Balloon Repayment Home Loans

This type of loan repayment option is a little different from a step-up loan! A balloon repayment takes its name and repayment structure from the shape of a balloon that swells at the top. Just like a step-up loan, a borrower choosing the balloon loan repayment option would pay lower EMIs in the beginning years of the loan tenure. However, the similarity ends there. As we move into the loan tenure the borrower, would be required to pay more than one-third of the loan amount during the last installments.

 

It is wise to understand all options before signing up for a loan and choose the option most suited to your earning capacity, age in life and financial plans.

 

 

 

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