While buying your dream home via a Home loan is preferably considered as one of the best options among all, the repayment of the Loan EMI on correct time also becomes the sole responsibility of the homebuyer. Banks and financial institutions these days offer many custom-made, attractive, and customer-centric repayment plans, but then it is all up to the loan borrowers to choose the one that doesn’t hit their pockets as well as finances. So, before opting for any kind of EMI repayment options, a homebuyer must analyse their finances, monthly spending, etc.
Take a look at some of the best EMI repayment options available for homebuyers in the loan world:
Repayment Option 1: Step-up EMI
This is one of the most popular repayment options which almost all the homebuyers opt for. Under, Step-up EMI, the EMI is directly linked with the borrower’s income growth. That’s why this method is most common among buyers who are young professionals or are in their 30s. Thus as the income of the borrower grows, the EMI interest rate also increases gradually. So, you can start with a lower EMI but later, you can shift to higher EMIS as your income grows and so is your spending and savings.
Repayment Option 2: Step-down EMI
This EMI option is just the opposite of the above one. Here, the borrower pays higher EMIs at the beginning that gradually decreases with increasing tenure. Now, higher EMI means a borrower has to pay higher principal payment as well, so in this case, the borrower must prepay the loan as soon as possible.
Such repayment option is mostly preferred by those borrowers who are in their late 40s and whose retirement period is nearby. As at this stage, the income growth gets saturated and also a financial burden on the borrower increases.
Repayment Option 3: Linking Home Loan with Bank Account
This is a new repayment option which some of the borrowers prefer these days. Under this, your home loan is directly linked with the bank account. However, the rate of interest is calculated after subtracting the monthly average balance in the account from the outstanding principal amount of the loan. Moreover, in order to maintain liquidity, borrowers can use this account as per their own needs and requirements.
Repayment Option 4: Linking Home Loan with Bank Account
If you are investing in an under-construction property, then this EMI repayment is best for you. In case of such properties, banks and financial institutions disburse the loan to borrowers as per the level of construction. Due to this, a borrower has to pay just the Pre-EMI money and not the whole principal and interest rates together. So it helps in reducing the burden on the borrower who can start the higher EMIs when the property is complete.
However, borrowers cannot take tax benefit of this pre-EMI money as it just involves only one factor i.e. principal. On the other hand, once the borrower starts paying both interest rate and principal component, they can enjoy tax benefit on the home loan.
Repayment Option 5: EMI Holiday
Last but not least, a loan borrower can also ask the banks to send them on an EMI Holiday. In this, banks give specific months of the time, usually up to 36 months, wherein you don’t have to pay the loan EMIs. However, it does not mean that you can enjoy the same benefit on loan interest rates too. It remains to add up in the loan amount.
So, choose from any of the repayment options above and enjoy a peaceful EMI life.