Loan Repayment Calculation India Banks
Wants are unlimited and the cash to fulfill them is limited. It gives you immense pleasure to own a house of your own or to own a car. Thus home loan, car loan, wedding loan, etc are applied for to fulfill the need. But when the time to repay the loan comes, tension builds up. How to manage the monthly loan installment and also daily household expenses with the fixed monthly income is a question?
The loan repayment becomes a part your monthly budget. Proper planning should be done to avoid over budget and save you from stress and worries. The most important thing to remember is never miss a payment to avoid penalties and complications.
There are some tips you should follow to help you through your repayment of home loans or repayment of car loans;
- You should make your first repayment as soon as you get the loan. This can save you a lot money as the principle amount reduces and thus the interest to be paid is reduced.
- Make additional payments apart from monthly installment. This reduces the time for repayment and also the cost of a loan.
- If the usual loan installment decreases when interest rate falls, don’t lower the monthly repayment amount. Continue paying the same amount as this will help in repaying the loan early.
- You can also have your income paid directly into your home loan and manage the day to day expenses on a credit card with a interest free period.
There are different methods of repayment of loan and you should choose the one which suits you the best.
- Shorter period is better: The most important point while applying for loan is the repayment period. The shorter the repayment period less will be the amount of interest to be paid on the loan.
- Standard loan repayment: It is the most common method of repayment. Fixed amount is repaid monthly and after a period the loan amount is paid off.
- Graduated repayment: In this method, in initial months the amount paid is small and after a certain period it increases. This is suitable for people who expect their earnings to increase over time.
- Balloon Payment: In this method, only the interest amount is paid initially for a number of years and then pay the entire balance at one go. This is suitable for people who expect lump sum amount in future.
- Changing the terms: If you find you can repay the loan more quickly, then do so but beware of the early repayment charges. On the other hand if you are unable to pay the installment amount then ask for extension from the lender. Thus the terms can be changed as per the need of the borrower on approval of lender.