Suffering from high EMI? Here’s everything you need to know about step-up and step-down loans

Loans in India are used for a variety of purposes, from starting a business to buying a car. The bank and his NBFC (non-bank financial company) offer loans with different interest rates and repayment terms. With proper research and comparison of available options, individuals can choose the best loan her option that suits their needs.

Among the various loan options available in India, step-up and step-down loans are one of the popular ways to borrow money. These loans are designed to help people who have difficulty obtaining regular loans or who need to borrow money for a short period of time. This type of loan is beneficial because it allows borrowers to easily adjust their payments as their income increases or decreases. Let’s understand this in detail.

What are step-up and step-down loans?

A step-up loan has an EMI that varies over the life of the loan. Step-up loans have lower EMI during the first few years of the loan term. As the years go by, the amount of EMI increases.

Borrowers are expected to progress professionally, get raises and get promotions. Therefore, even if EMI rises over time, it will remain affordable for borrowers.

For step-down loans, the EMI component decreases with each year of the loan term. According to this plan, borrowers will pay more EMI in the first few years of the loan, and when the term reaches the halfway point, EMI will start declining until the final year of the loan.

This is the best plan for those who are about to retire. They can afford to pay more EMI during the first few years of employment and less as retirement approaches.

What are the advantages of step-up and step-down loans?

The main advantage of a step-up or step-down loan is that it offers the borrower flexibility. This allows you to pay more when your income increases and less when your income decreases. This is especially useful for those whose income fluctuates seasonally.

Another benefit of step-up or step-down loans is easier access to credit. Loans are based on the borrower’s income, not their credit history, so even people with poor credit history may be able to get this type of loan. Additionally, this type of loan often has lower interest rates than traditional loans, making it more affordable.

In addition to the above benefits, step-up and step-down loans can also be used to finance large purchases such as cars and homes. This is because these loans are often offered at more competitive interest rates than traditional loans. This means you save on your purchase price.

Overall, step-up and step-down loans are excellent options for those who want to manage their financial risk when taking out a loan. So, if you’re looking for a loan product that is flexible and potentially saves you money, a step-up or step-down loan might be the right choice for you.