Prepayment Option or Repayment option: A better option in Personal Loan
Nowadays to bring stability in the economy the countries and the ministry of the governments are trying their level best to bring some relaxation in the financial services of different types so that the people who are unable to repay their loans as there is lower purchasing power along with the loss of millions of jobs have made them move in the back foot.
The introduction of the moratorium period and the decreasing of the rate of interest as well as other different types of relaxations have done a great job. First of all, the concept of a personal loan is very important to know. A personal loan interest calculator on the official websites of Financial institutions will provide better estimations. A personal loan is a loan where security is required but the things are dependent on the income of the particular person who is availing the loan.
The income capacity of the people is considered to be the most concerning and the crucial criteria in the case of a personal loan as it is the only source of income by which the persons will be paying the repayment loan. If a person is having a good monthly income then he will have the good purchasing power to finish the repayment of the loan in a very efficient and good manner. While on the other side of the coin, if the person is unstable with employment or having irregular earnings then it might be the situation that one meets with non-payment of the loan amount of EMI in any of the months suddenly.
A Personal loan is the type of loan which can be repaid on which or can be said that the payments and the payment of prepayments options are such that it can be said as equivalent to that of a boon. Prepayments mean payment of a loan before the expiry of its loan tenure. For example, if a loan has been availed for a period of six months and the payment has been done within the short term period of 5 months then it will be treated as a for the loan tenure.
Prepayments are done to save the different kinds of interest and charges that will be provided upon the loan borrower. For example, every Financial institution is having a particular timing and the rates for the charge on the prepayments because there will be saving from the side of the loan borrower but the amount or the interest save from the side of the customers is a loss or an expense from the viewpoint of the Bank or the financial institution.
Now is the time to proceed forward towards the repayment options which mainly consists of paying the amount of the loan in the form of the EMI and the principal together or separately. Repayments involve the paying up of the amount of loan as per the schedule till the expiry of the loan term. There are different types of repayment options, among which the bullet repayment option is one of the most preferable and the shortcut one.
In this type of repayment option all the interest and the principal together at the last expiry of the term. One of the best advantages of this type of loan repayment is that a person will get enough time and can act accordingly whenever he will have the money in the surplus availability with him or her and thus providing the flexibility to pay as per his or her choice for the period of 5 years or a period of 10 years. For example, the SBI Personal Loan provides extra facilities for the betterment of the customers.
Conclusion:
The other options of paying the interest on a monthly installment EMI basis and paying the principal at the very last expiry of the term. One of the best advantages of this type of repayment option is that it will give enough time to the borrower to arrange for the principal amount if there is any kind of issue in between the loan tenure time.
Also read this: How To Escape Debt Trap Of Personal Loan