There are several types of loan repayment methods in India, including:
1. Equated Monthly Installments (EMI) – This is the most common method of loan repayment in India. In an EMI, the borrower pays a fixed amount every month, which includes both the principal amount and interest. The EMI amount remains constant throughout the repayment period.
2. Bullet Repayment – In this method, the borrower pays only the interest during the loan tenure and repays the principal amount in a lump sum at the end of the loan term.
3. Step-Up Repayment – In this method, the EMI amount increases gradually over the loan tenure, as the borrower’s income is expected to increase in the future.
4. Step-Down Repayment – This is the opposite of step-up repayment. Here, the EMI amount is higher in the initial years of the loan tenure and decreases gradually over time.
5. Overdraft Facility – In this method, the borrower is allowed to withdraw money up to a certain limit as and when required. The interest is charged only on the amount withdrawn and not on the entire loan amount.
6. Pre-EMI Repayment – This is a partial repayment method where the borrower pays only the interest component of the loan during the construction phase of the property. Once the construction is completed, the borrower starts paying EMIs that include both principal and interest.
The type of loan repayment method depends on the type of loan, lender, and borrower’s financial situation. It’s important to choose a repayment method that suits your financial goals and repayment capacity.