How to Pay Home Loan EMI - ECS vs Cheque - Home Loan Blog - Tata Capital

How to Pay Home Loan EMI: ECS or Cheque?

Mar 08, 2017

An individual may take a home loan either from his bank or a financial institution. When a person avails of a loan from the bank where he holds an account, paying the monthly installment is very simple. As soon as the person receives his salary, the installment is automatically debited from his account.

The issue about choosing the method of paying the equated monthly installment (EMI) arises when the salary account is in one bank and the loan is taken from another institution. It is important to ensure the right amount is paid in a timely manner to avoid late fees and penalties.

On receiving approval for housing loan, the borrower may choose to pay the EMI in one of the two methods mentioned here:

Cheque Repayment

Borrowers choosing to pay the monthly installment with a cheque do not have to provide any specific instructions to the lenders. They must write a cheque and submit it to the lending institution before the due date. Another alternative is to withdraw cash from the salary account and deposit it in the lender's account. Both these alternatives are cumbersome and time-consuming and involve a manual procedure of visiting the lender every month. The only benefit is the borrowers do not have to pay any additional charges for paying the EMI with monthly cheques. Borrowers may reduce their efforts by providing post-dated cheques for a certain period of time, which are deposited by the bank on the due date.

Electronic Clearance Service (ECS)

For availing of the ECS facility, the borrower needs to fill a form and submit it to the lender. According to the amount and the date, the specific sum is debited from the borrower's account and transferred to the home loan account. Generally, the debiting bank levies a small charge on the users for availing of this facility. Every institution levies a different charge and checking the details with the bank before choosing the ECS facility is advisable. The biggest benefit of using the ECS facility is that it eliminates the manual work and ensures the borrowers never miss out on the due date and prevents pay penalties.

Choosing between cheque repayment and ECS is a personal decision and must be based on the convenience of every individual. If a person lives close to the bank from where he has taken up the housing finance, paying through cheque may be beneficial. On the other hand, if a person does not have the time to visit the bank every month, opting for the ECS facility is advisable. Checking the additional charges to ensure these charges do not significantly increase the cost of the housing loan is important while making the right choice.