Select A Suitable Way Of Refunding Your Car Loan
Car loans in India have become explosively admirable in the last few years. The financiers are creating more innovative loan products each year in an attempt to lure more and more patrons. There are several kinds of modified or one can say customized car loans present in the market, strictly designed to suit special requirements of the borrower.
Nowadays, for the various types of auto loans there are different alternatives available to refund a loan. Number of people are not aware of these alternatives by which one can end up a car loan.
An applicant must be aware about various methods available to them at the time of the approval of a car loan. There are six types of car loan refunding methods. One can select anyone according to his/her suitability and affordability.
Different Ways Of Refunding Your Car Loan
1. Balloon EMI: In this method an individual can pay a lump-sum amount up to 20 per cent of the loan amount at the end of the repayment tenure. Though the interest rate charged in this method is higher than the interest rate charged in regular EMIs, it reduces the initial burden on the customer.
2. Regular EMI: In India it is the most used refunding option people like to avail today when it comes to a car loan. In this method of repayment, a static rate of interest is decided, based on which equated monthly instalments (EMIs) are computed for an entire loan tenure. Interest rates are the lowest in the regular EMI option. Instalments can be paid either at the end of the month, called ‘monthly in arrears’ or at the beginning of each month, called ‘monthly in advance’.
3. Step-up EMI: As its name depicts the amount of the installments increases as the loan tenure passes away from being the lowest in the first year of the loan tenure and increases gradually after that. The interest rate applicable in this alternative is higher than that in the case of normal EMIs. Customers prefer this option to have a lesser load initially and then slowly get habitual to higher EMIs as their earnings increases.
4. Step-down EMI: Same is the case with step down, but in an opposite direction. In this case, the EMI reduces steadily from being maximum at first. Though the interest rate with step down EMIs is higher than that in the normal EMI method, the overall cost of the loan may be lesser as the acquired amount from the bank is paid back earlier.
5. Lease and refinancing: It is a seldom used choice where the patron pays the banker an EMI corresponding to rent charges of the car and then at the end of the loan tenure gets an option to pay the current price of the car.
6. Special tie-up: It is often called as a ‘super saver tie up’ option, it makes sure the maximum profit for the patron as the financier here has a tie-up with the bank of the borrower. The deal is made such that whenever there is additional money in the account, the same is used for as refunding the car loan. It helps to reduce the acquired loan amount in advance, resulting in considerable savings in the total amount paid out in the long-run.
Each patron has a different set of economic considerations based on which he can stumble on the most suitable alternative not only for his car loan but also for a home loan. However, having a detailed understanding of a variety of options existing in the market makes it easier to take a more favourable decision.
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