Frugal Living » How to Pick the Right Car Loan Repayment Option

How to Pick the Right Car Loan Repayment Option

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Car loans have become extremely popular during the last decade with the financiers making more creative loan products every year in an attempt to attract more and more clients. There are many types of personalized car loans in the market, to suit the diverse needs of the borrowers. In addition to different kinds of car loans in the market, there are many different options available to repay your loan.


How to Pick the Right Car Loan Repayment Option

Loan applicants should learn about the different ways available for them when signing an agreement with any financier. As most of us aren’t aware of the different ways available to wrap up a car loan, we present to you a list stating all the available car loan repayment methods to select from.



Regular EMIs

When it comes to car loan repayment options, regular EMIs are the most popular kind of repayment options available on the market. In this repayment option, the financier decides a fixed interest rate, based on which the EMIs are calculated for the entire repayment option. The rate of interest is the lowest one in the regular EMI loan repayment option. You can either pay the installment at the end of every month known as “monthly in arrears” or pay it at the starting of every month, known as “monthly in advance”.


Step Up EMIs

In this type of repayment option, the EMI amount increases during the loan term as the loan repayment progress from lowest in first year and then increasing steadily subsequently. The applicable rate of interest in this repayment option is higher than the regular EMI option. People select this loan repayment option to have a lesser burden at first and then get used to the higher EMIs with increasing income slowly.


Step Down EMIs

Unlike the step-up EMI car loan repayment option, the EMI in this option is the highest in the beginning and keeps reducing steadily. Though the rate of interest is higher with Stepdown EMI than with regular EMI option, the total cost to be paid back is lesser as the principal amount is easily paid back sooner.

Special Tie Up

Also called “Super Saver Tie Up”, this car loan repayment option ensures the utmost benefit for borrowers as the financier has a tip-up directly with the bank of the borrower. In this, the arrangement is in such a way that if there is extra money available in the bank account, the same can be utilized to pay the loan out o turn. This helps decrease the principal resulting in substantial savings in the total amount that is paid in the long run.


Balloon EMIs

There is a condition of paying lump sum amount in this option up to 20% of the principal amount at the repayment tenure end. Though the interest rate chargeable for this option is higher than that of regular EMIs, this reduces the primary burden on the borrower.

Lease and Refinancing

It is a rarely used loan repayment option where a borrower pays financier an EMI equal to lease charge of the car and at the loan repayment tenure’s end get the option to pay the current value of the car.

Every customer has different financial considerations depending on which they can find out the most appropriate option for their car loan; having a comprehensive understanding of the different options on the market can make it simpler to make a wiser decision.


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1 thought on “How to Pick the Right Car Loan Repayment Option”

  1. Private lenders can be an option for borrowers who have been turned down by traditional lenders due to credit issues, income fluctuations, or unconventional income sources.


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