Looking For A Suitable Home Loan Repayment Plan? Read This

The Indian real estate market is seeing a variety of home buyers spread across different financial profiles. A majority of home buyers take a home loan and to make home loan repayment easy, banks provide a wide variety of repayment options.

Here are the kinds of repayment options you can choose from:

Accelerated repayment plan

Under this plan, a borrower can increase his equated monthly instalment (EMI) amount as and when he has spare funds. This way he can repay the loan faster. For instance, if the borrower gets a bonus or a salary hike, he can immediately transfer that amount towards paying off the home loan. It is best suited for home owners who expect career improvement in the next few years of taking the home loan.

Step-up repayment plan

In this plan, too, banks allow borrowers to shape the EMI according to their financial progress. EMIs are lower in the initial years and go up as time progresses. This scheme is best-suited for young home buyers.

Flexible loan repayment plan

Flexible loan repayment plans are tailor-made for those who are close to retirement. They can pay higher instalments in the years that they are employed and the size of EMI can taper off later. This plan is also used by couples who take a long-term loan together with their children.  

The repayment plan can be flexible to suit people under different salary slabs. In case if a person is close to retirement, the EMI can be shifted to the salaried parent or spouse/partner in the later years.

Balloon repayment plan

This plan is uniquely designed for those who expect a heavy amount at the time of their retirement. In this plan, around 25 per cent of loan amount is paid as a lumpsum amount in the last instalment or EMI. For instance, a person who has taken a loan of around Rs 10 lakh would agree to pay Rs 2 lakh as the last instalment and source the amount from his or her retirement funds. This plan is best-suited for those who are mid-way through the career and choose to pay off their home loan just around the time they retire so that they would no longer bear the burden when they do not work.

When opting for a repayment plan, always opt for the one that suits your earning potential. It is, hence, important to organise and plan your career and its direction, carefully and align it to your home loan.