₹5 Lakh Loan Repayment Plans: Find the Best Option for You
It is a major decision to take a ₹5 lakh loan. Paying back on time is equally critical. The appropriate plan can get you out of money worries. Let us examine some repayment plans and choose the one that is best for you.
Equated Monthly Installments (EMI) Plans
EMI is the most widely used method of repaying a loan. The lender advances you a fixed sum to pay each month. The EMI will vary based on the tenure of the loan and interest rate. If the tenure is longer, EMIs are lower, but you end up paying more interest in total. If the tenure is shorter, EMIs are larger, but the interest paid is less.
For example, if you take a loan of rupees five lakh at an interest rate of ten percent for a tenure of five years, your EMI would be around above ten thousand rupees. If you choose seven years as the tenor, your EMI reduces to around 10 thousand but you pay more interest in total.
Step-Up EMI Plan
This plan is best suited if your income level is likely to increase in the future. You pay a lower EMI initially and it goes up over some time. This plan is beneficial for young executives who would earn more as they gain more years of experience. The overall interest paid is more, but it gives relief in the initial years.
Step-Down EMI Plan
This plan starts with a high EMI, which reduces over time. It suits people who have extra money now but may have lower incomes later. Business owners or people close to retirement often choose this option. It helps clear the loan faster while income is still strong.
Bullet Repayment Plan
In this scheme, you only pay the interest within the term. The principal is repaid at the end. This scheme is beneficial if you expect future lump sum income. But it is dangerous since you should be certain that you can repay the total amount in the future.
Bi-weekly Payments
Rather than monthly EMIs, you pay twice a month. This lightens the interest load and pays off the loan sooner. If you can handle regular payments, this scheme saves you interest.
Loan Prepayment Option
If you receive additional money from a bonus or an investment, you can pay off some of your Instant moneyloan in advance. This lowers the overall interest you pay. Some banks charge an early payment fee, so read the conditions before opting for this option.
How to Select the Right Plan?
- If you prefer fixed payments, select a fixed EMI plan.
- If your income is expected to increase, opt for a step-up EMI plan.
- If you already have savings and are willing to pay fast, choose a step-down plan.
- If you look forward to receiving a large payment down the road, a bullet plan could be an option.
- If you want to make payments frequently, bi-weekly payments are the way to go. If you have money lying around, prepayment is the way to go.
The correct decision makes repayment easier. Think about your income, outgoings, and your future plans. Decide on the one that works best for you.
