According to TransUnion CIBIL’s reports on credit trends, loan on property borrowing among Indians grew at the rate of 21.8% in 2018. This advance is popular among individuals because it comes with no end-usage restrictions, allowing a borrower to utilize it to cover several financial requirements, including medical emergencies, travel expenses, wedding costs, higher education costs, etc.
Additionally, the introduction of several attractive features by various lending institutions in the country has also contributed to boosting the popularity of this advance among individuals. One of these features is the facility of loan against property overdraft, similar to a flexible lending facility, which can be availed as an alternative of regular term loans for borrowing credits.
But before knowing which one is the better option between term loans and EMI based credit facility, it is crucial to learn about each of their features.
What Does The Term Loan Mean?
A term loan is an advance that is repaid in regular intervals through a fixed period via Equated Monthly Installments. EMIs refers to the fixed amount that is paid by an individual to a lending institution each month to repay any loan. This equated monthly amount consists of a principal component and an interest component whose proportions vary throughout the loan tenor.
For instance, any individual looking to avail a term mortgage loan from any financial institution has to repay the advance over the pre-fixed tenor in fixed installment amounts.
In most cases, when an individual chooses to avail a term loan, the initial EMI amounts have a higher interest component compared to the principal component. However, as the tenor proceeds, the proportion of interest steadily decreases while the principal increases, until the repayment balance becomes zero.
EMI payments are efficient options when it comes to repaying a loan against property. But to reduce credit-related debts on borrowers even further, financial institutions like Bajaj Finserv have introduced the loan against property overdraft or the Flexi Loan feature.
What Is The Flexi Loan Facility For Availing This Advance?
Individuals opting for the Flexi Loan or loan against property overdraft facility can access a pre-approved loan limit depending on their credit history. They can then withdraw the amount according to their requirements from the total sanctioned amount. Additionally, they can also enjoy the benefit of paying interest only on the amount they utilize from the total quantum of funds borrowed.
Following are the few features and benefits offered under this facility –
- Borrowers don’t need to apply multiple times to avail this advance, they can withdraw the amount according to their requirements and transfer it to their accounts directly.
- You can choose to prepay their borrowed advance in part without any additional charges if you have access to surplus funds. However, make sure you check the charges of your LAP to ensure that you are informed about them, if any.
- With this feature, borrowers can choose to pay only the interest on their loan amount as their initial EMI and pay principal amount at the end of loan tenor, thus reducing EMI payments by almost 50%.
- The interest is levied on amount borrowed daily, according to the amount you utilize each day.
- Withdrawal and part-prepayment of the funds can be carried out through the lender’s online services, making this process hassle-free.
Using the flexi-loan feature to avail the loan against property can be quite advantageous for individuals who want to reduce their loan burden. However, this facility of paying lower EMI with Flexi Hybrid LAP is offered only by financial institutions like Bajaj Finserv. Additionally, the NBFC also provides pre-approved offers that can make availing loans faster and easier. This loan is available on several financial products, including home loan, personal loan, business loan, etc. You can check your pre-approved offer by providing your name and phone number.
Additional Read: What Is The Difference Between Loan And Overdraft?
Which One Should You Opt For?
While flexi loan options sound more advantageous, borrowers should choose between them and term loans according to their credit requirements.
For instance, if an individual requires the entire lump-sum loan amount to fulfill any financial obligation, it is better to choose the term loan option and repay the borrowed amount through regular EMIs. On the other hand, if they need the amount sanctioned in installments, it is best to opt for a flexible lending facility. Therefore, you should opt for the property loan option that is best suited for your requirements.