Paying back home loans: Which repayment option suits you best?
By Joseph Samson
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Tranche based EMI

This facility is for those who have availed loans for under construction property.

For an under construction property, borrowers have to pay interest on the loan amount drawn by them, till the entire loan amount is disbursed. But, with the tranche based EMI facility, borrowers decide the amount of EMIs they want to pay until the construction of property is complete. The minimum amount is paid as interest on credit drawn whereas anything above interest goes towards the repayment of the principal amount.

This facility is very beneficial to the borrower as he starts paying off EMIs earlier and therefore can repay the loan sooner.

Accelerated repayment scheme

This home loan repayment scheme provides borrowers with the chance to repay the loan faster by increasing their EMI amounts whenever they have the extra funds which they would like to use towards home loan repayment. In case of an increment or a hike in the borrower's disposable income or in case the borrower has lump sum funds, he can use the increased amount for prepaying the loan. In this way, the borrower repays the loan faster and saves on the interest element of the loan.

Balloon payment

Under a scheme of balloon payment, the borrower repays about one third of the loan amount during the last installments. Balloon payment involves a hefty, lump sum payment of loans at some pre-determined intervals like 5 yearly or so or at the concluding stages of a long term loan. This scheme is advised only for those who have very high financial needs and should be avoided as the borrower pays more interest on it as compared to other loan schemes.

There are several ways by which home loan borrowers can repay their loans on favorable conditions but many a times people miss out on these opportunities as many do not understand the fine print of the repayment options. Borrowers should always choose that repayment plan which lessens the burden of EMIs and helps them to pay off a loan easily.

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