What Are The Repayment Options Available for Used Car Loans? - Tata Capital

What Are The Repayment Options Available for Used Car Loans?

Mar 02, 2017

Many individuals wish to buy pre-owned cars, but may not have the finance to do so. In such cases, banks and financial institutions provide loans to help them seek finance. The repayment plans on these loans may vary from lender to lender.

Now-a-days, financial institutions offer flexible EMI schemes on used car loans online so as to provide convenience to their customers. Loan seekers may therefore tailor their EMI amount, based on their cash flow. Given any unexpected surge in income, borrowers may prepay a certain amount. Similarly, if the cash inflow for a particular month is low, borrowers may pay less during the current month and pay a higher amount later. Such flexible plans provide a lot of convenience to loan seekers.

Following are five repayment options you may choose from if you wish to borrow a used car loan online.

  1. Equal regular payments
    This is the most common type of loan repayment. In this option, the repayment amount is constant throughout the tenure of the loan. The EMI changes only with an increase in the rate of interest. The rate of interest is lowest in the regular EMI plan as compared to other repayment options.
  2. Bullet plan
    Some individuals may receive an unexpected inflow of cash due to some particular reasons. They may therefore wish to prepay their loan amount or a part of the total amount. Bullet EMI plans allow borrowers to make prepayments in parts at periodic intervals. Prepaying the loan helps lower the installment amount considerably.
  3. Step Up EMI plan
    According to this plan, the borrower pays the lowest amount in the first year and then increases the amount steadily every year. This plan is best suited for those borrowers expecting an increase in their incomes every year. Remember, the interest rates applicable in this option are higher than the regular EMI option.
  4. Step Down plan
    As the name suggests, Step Down plan allows borrowers to lower their EMI amount every year. The EMI at the start of the loan tenure is the highest, and then decreases over time. Borrowers end up paying a lesser amount as the principal is paid back sooner.
  5. Balloon EMI option
    A balloon payment is defined as an oversized payment made at the end of the loan tenure. Thus, borrowers have to pay a small fixed sum over the period of their loan and a large sum at the end. This EMI option is suitable for those individuals who are liable to receive a huge amount of money, either from sale of a property or an asset.

With numerous repayment optionsavailable in the market, it only becomes difficult to identify the one suited for you. Therefore, you mustchoose the plan based on your ability to pay off the loan and your financial position.