How Does Home Loan Flexi EMI Work?

When you apply for any loan, one thing that you are sure about is the need to repay it back, the principal along with the interest. This repayment is as per a pre-decided schedule, the total amount (interest and principal) is divided into Equated Monthly Installments (EMIs). So if you have taken a home loan of Rs. 30,00,000 for 25 year @ 9% (fixed) you will have to pay an EMI of Rs. 25,176 for the next 25 years unless you prepay the loan! However what if told there could be a twist in the tale. The EMI amount could vary. Let’s read to understand more.

What are Flexi Pay Loans ?

In current times financial service providers are going out of their way to offer customized products and services to their clients. Flexi EMIs are just an example of this. There are four options that can be offered to the borrower so that he can have a flexible repayment schedule.

  1. Step Up EMI: The EMI on the home loan is less for the initial years and increases in the later part of the loan duration.

  2. Step Down EMI: This as is clear from the name is converse of the first option. The borrower pays lesser during the later years of the loan duration and pays a higher amount in the initial years.

  3. Bullet EMIs: Here the borrower pays at regular intervals some amount (also called the bullet amount) which reduces the overall loan burden.

  4. Balloon EMIs: Here the EMI burden is low during the entire loan tenure and the borrowers pays a big (balloon amount) at the end of the loan term.

The above are the four types of flexi repayment options that are available to the borrower for repayment but banks in India currently offer flexibility in repayment either as per the step up EMI or step down EMI method.

How Does the Flexi EMI Option Work?

Currently ICICI offers the option to repay in a flexible manner where during initial years higher payments are made and in the later years lower amount is paid like in the step down method. This is called the Flexible Loan Installment Plan (FLIP). So if you have an ICICI Bank Home Loan and you have the option to repay your dues using the FLIP method.

This is suitable for those borrowers who have applied for a loan jointly and as the years go, one of the applicants may retire or may stop working. This means that the income inflow is expected to reduce in the later years of the tenure. So here the borrowers have the option of paying a larger amount in the initial years when both are working which means higher disposable income in the early years of the loan.

SBI Flexipay Home Loans which are designed a little differently. Here SBI provides the borrower an option to take a higher loan amount (they offer higher loan eligibility). This facility is available to only the salaried individuals. The borrowers can choose to pay only the interest part during the moratorium or the pre-EMI period, after this they pay moderated EMIs. The EMI amount goes up for the later years (it is stepped up).

This option is very suitable for young borrowers who may not have the income levels to borrow the required amount of loan (in current times) but their salary levels are likely to go up in the future so they will be able to bear the burden of bigger EMIs. These loans offer enhanced loan eligibility which may be up to 20% higher.

Lenders are trying their best to offer flexible options to borrowers to repay their dues however borrowers need to use their discretion when choosing a product for themselves. Not being able to pay the dues on time could have financial implications and also impact the CIBIL score calculation negatively. So borrow only the amount for which you can bear the EMI burden.


5 Things You Should Teach Your Child about their First Credit Card

Parents have the responsibility of teaching their children about various aspects of life; financial literacy is one of them. Credit cards are an integral part of life today, their usage offers a lot of convenience but using credit cards responsibly is very important. Their usage impacts the credit score and also the various financial aspects about an individual. Here are a few things that you should tell your child about their credit card and its usage.

  1. The Amount Used is Borrowed and needs to be Repaid:

This is the most important and basic aspect that needs to be explained to the children. They need to be told that whenever we use a card, the amount is like a loan and needs to be repaid within the given time frame else there are consequences for not doing that. This will ensure that they use only an amount equivalent to what they can repay and do not struggle at the end of the month to pay the credit card bill.

  1. Credit Cards Come With a Limit:

Each credit card is issued with a credit limit. This is the maximum amount that can be spent by the user without repaying the old dues. It is important to let the child know that the limit for the credit cards is for a reason and the user must respect this limit. It important to let the user know that the spending must ideally be less that 30% of the sanctioned limit; spending more that reveals credit hungry behavior and over dependence on credit cards. Exceeding the limit comes with a cost.

  1. Delays In Payment Are Costly:

Payments for credit cards have to be made by the given due date or before that. If the payment is not made on time or a payment is missed then there are negative consequences for the user. Delayed payments attract late payment penalty while missed payments attract both a late payment penalty and interest on the overdue amount for the delayed period too. This impacts the credit score negatively too, frequent delays in payments and missing them could harm the credit rating to a great extent.

  1. Your Decisions Have a Long Lasting Impact:

This is one of the most important factors that needs to be understood by all card user especially youngsters who start using cards for the first time. They need to know that whatever decisions they take regarding their credit cards, those decisions will have a long term impact on their credit health and financial health too. If they miss payments, it will be reported in the credit report and will reflect in it for 36 months. Even if they decide to surrender a card, the delay in payments will still continue to reflect in the CIR for the stipulated time frame. If overdependence on credit cards results in the user falling in a debt trap it can be difficult to get out of it. Unpaid credit card bills attract penalty and interest which keeps on adding to the debt burden. This results in additional financial burden apart from the already overdue amount and also impacts the overall credit rating

  1. Follow Basic Guidelines for Using Cards Safely:

Another important aspect related to card usage is regarding its safety. Whenever the user uses his/her card they must follow the basic guidelines related to it. When using it physically ensure that you take the card back and keep it safely, do not let the card out of sight when it is being swiped, do not share the PIN number and preferably use a card that has the user’s photograph on it. If the card is being used online then use it on secure websites and do not store your details on websites.

Just like you teach your child about all aspects of life, make sure you make them aware about the right way to use the credit card too.

5 Ways To Save Money in Minutes with Credit Cards

Eyes go wide as soon as we see a title which says save money! Saving money is a big task today. Earlier people operated with the mentality of spending less than the requirements and saving more. But today, the youth thinks differently. Living in “now” has become the agenda. Future will be taken care of is what the majority thinks. Also, with the various credit options available, there is some negligence over savings. Also, the availability of the credits have been a soothing thing. Short term and long term credits are available at minimum interest rates. The credit providers come with such interesting schemes which would also make it attractive to go for it! If in all this if one comes to know that for saving the money you don’t have to do any extra effort and your spendings would help you save a big bucks! Wow, what more would one require?

Let’s see how can this be achieved. When we talk about credit cards, there are various options that are available in market which helps you not only save money on what you spend but also earn few bucks! How is that possible? There are various opinions and offers which credit card issuer gives us! We will look at most common and easily available options.

  1. Reward Points

There are so many credit card schemes where you are rewarded with the the points. On each spending of 100 Rs, few points are added to your card. And it then works in multiples. If you are a frequent credit card user, you must go through this types of cards. By spending your usuals, you can collect reward points and then each point has some value which will then turn as money when you go through the reward point shopping!

  1. Dining offers

There are various banks which offers dining discounts on cards. They have multiple partnered restaurants where you can avail discounts ranging from 10% to 30%. If you are regular diner, this will also help in saving great amount! Suppose you go to restaurants which offers 30% discounts, technically your 4th dinner will be free!

  1. Travel Free

There are jet mile cards where in with every swipe you are eligible to get a few miles. The more you swipe that card and book travel tickets via those cards, few miles gets added in the card. And you can swipe that against your travel tickets which would deduct those many miles from it! You swipe the card in your daily needs, and the travel cost then is free so you save extra!

  1. Sign-up bonus

Many credit cards have sign-up bonus! Where if you sign-up, there would be 1000 or 2000 or sometimes even more points would be gifted to you. These can be used when you go to shop or book tickets for entertainment or you go shopping online, these can be used. So you can save even there. But, this will not mean that you keep on signing significantly for different cards. While the CIBIL score check, your behaviour is always monitored and this can be a mark down for the same.

  1. Pay on Time!

There a few banks who offers few extra points if you make your payment of your credit card usage on or before the dew date! The more organized and responsible you are towards the payment, you can avail better points. And as all other offers, more the points more the bonus!

All these are amazing ways how you can save money by using your credit card! But, be vigilant enough in using. Never over do, stay steady and use only that much which you can reply!