Buying their dream home requires most people to avail a home loan. The growing demand for such loans has led banks and financial institutions to offer them in a manner tailored to suit the needs of their clients. Apart from providing flexibility in loan repayment, the lenders also offer the facility of reducing interest rates and longer tenures to attract clients. Contrary to the popular belief, these offers are beneficial to the borrowers as well as the lending institutions.
In fact, these offers are known to enhance the repayment capacity of the borrowers besides providing them substantial tax benefits. However, irrespective of these benefits, the key consideration of people availing home loans is to ensure its timely repayment. Discussed below are the ways in which this can be ensured while also reducing the stress of repayment:
1. Opt for loans that start with delayed EMI payment
It is not uncommon for real estate developers to offer booking for residential units even before the actual construction on the project has begun. Hence, the home owners are granted possession of their property at least a couple of years after the booking has been made. For people investing in such properties it is advisable to choose a home loan option where they start paying the EMI’s two to five years after their loan has been approved. The borrowers are not required to pay any amount to the lenders during this period, which enables them to plan and manage their funds in a better manner. Sadly, not all lenders offer this facility on their home loans, which is why it is important for the borrowers to do some research before choosing the most appropriate lender.
2. Home loans with reducing EMI option
This option is suitable for people seeking home loans to buy a property that is still under construction. According to this scheme, the EMI amount reduces as the duration of the loan repayment increases. This flexible method works on the concept of reducing balance to calculate the loan amount that the borrowers need to pay during the various repayment stages. In this plan the interest payment is also higher during the initial years and it gradually reduces in the later years as the EMI amount is reduced. Hence it is advisable for the loan applicants to come up with a suitable repayment plan to avoid missing a payment and end up paying heavy penalties.
3. Home loans with the option of increasing EMI
This flexible loan scheme is completely opposite to the option of decreasing EMIs. In this case, the repayment plan is designed in a manner that leads to gradual increase in the EMI amount as the loan repayment tenure progresses. One of the biggest benefits of availing this type of home loan is that the borrowers can seek a greater loan amount. In addition, the higher EMIs in the later year also mean faster repayment of loan which can prove to be a great relief for the loan applicants. However, this loan option is suitable only for people who can vouch for a consistent increase in their income in the near future and whenever there is a shortage of cash, one should go for fast cash loans to meet his need.
4. Home loans with lump sum payment option
For most lenders offering home loans, a major percentage of interest earned on the loan amount forms their net profit. That is why most lenders do not favor the concept of lump sum payment of the loan. By allowing their clients to pay back their entire loan amount at once, they lose out on the earnings in the form of interest. Thankfully there are quite a few lending institutions that are extremely flexible in this manner. Such lenders, allow the borrowers to pay back the entire loan amount at once but only after charging a hefty fine in lieu of the loss of interest. However, even after paying the fine and the entire cash loan amount, the borrowers can save a decent amount.
5. Home loans with the option of balloon payment
This is a convenient home loan repayment option for people who cannot afford to pay through regular EMI’s. In this option the borrowers are required to pay-back a lump sum amount to the lenders after fixed intervals of time or during the last stages of the loan tenure. The time duration is pre-defined by the lending institution in keeping with the total loan duration and the payback capacity of the borrowers. The only drawback of this scheme is that it requires the borrowers to pay a hefty interest as compared to other schemes.
6. Home loans with longer repayment tenure
This is perhaps the most preferred option amongst people seeking home loans and with a limited repayment capacity. Longer loan tenure ensures that the payment plan is spread over a greater number of years. This automatically brings down the monthly EMI amount, which suits the needs of the borrowers and prevents them from missing any installment, even when if they end up paying a greater amount as overall interest.