In recent years, the financial landscape has witnessed a significant surge in the prevalence and popularity of small loan apps. These digital platforms have revolutionised the way individuals access short-term loans, offering a convenient and speedy alternative to traditional lending methods.
Their rise is largely attributed to the growing demand for immediate financial solutions, particularly among the younger, tech-savvy generation who prefer quick, hassle-free transactions. A pivotal aspect of this revolution, and one that garners considerable attention, is the flexibility of repayment options provided by these apps. This feature is of paramount importance in personal finance management, as it allows borrowers to tailor their repayment schedules in alignment with their financial situations and cash flows.
In a world where financial stability can be unpredictable, the ability to adjust loan repayments offers a much-needed cushion, helping individuals navigate through financial uncertainties without exacerbating their monetary stress.
Flexible repayment options have become a popular feature of a small loan app. We will be discussing these options in detail here.
Types of Flexible Repayment Options Offered by Small Loan Apps
1. Accelerated repayment
A top-notch small loan app may offer an accelerated repayment option wherein the borrower is provided with the flexibility to increase EMIs whenever his income rises.
As a salary may increase with a bonus or increment, the salaried individual can adjust the EMI amount, apportioned against the outstanding amount.
2. Step-up and step-down repayment option
This repayment option provided by a small loan app caters to the financial needs of individuals. It is ideal for both sets of individuals who are at the start of their careers and those who are closing retirement.
A step-up repayment option offered by a small loan app, allows the individuals to repay their EMIs with a small amount in the initial years. Gradually, the EMIs increase as the individual becomes financially stronger and reaches the peak of their career. Most lenders agree to sanction high loan amounts, keeping the growth potential of the individual in consideration.
A step-down repayment option, on the other hand, involves higher EMIs in the starting years and lower EMIs in the end. This type of repayment plan offered by a small loan app is ideal for individuals who may retire in the coming years. They may reduce their financial burden over the years and start saving more for retirement.
3. Balloon Repayment Scheme
A balloon repayment option offered by a small loan app allows an individual to pay 30-40% of the EMI in the last instalment and smaller EMIs in the initial years. It is generally a large sum that covers the outstanding principal balance of the loan. Most short-term loans offer balloon repayments. They also have lower interest rates.
4. Tranche-Based EMI Option
This option can be chosen by those availing construction home loans. This type of home loan usually involves the borrower paying interest amount or pre-EMIs till the construction is complete, after which the loan tenure begins. It may turn out to be expensive for the buyer as they continue paying interest but their repayments never matches the principal amount.
A tranche EMI option offered by a small loan app is a much more sensible option. This option enables the borrower to pay their EMIs soon after the initial disbursement of the loan amount. Herein, the borrower has the option to pay the instalments on either the full loan amount or the disbursed loan amount.
Do All Small Loan Apps Offer Flexible Repayment Options?
Some of the best small loan apps in the market offer these flexible repayment options, but not all.
However, most small loan apps offer exclusive personal loans called flexi-personal loan plans. Apart from offering higher flexibility in repayment options, they also provide convenient access to funds whenever the need arises. It must be noted that these plans come with a pre-approved credit limit.
This limit can be used for any purpose, personal or emergencies. Under these plans, the borrower is allowed to withdraw from the credit limit as many times as required. In addition to that, the borrower can also pre-pay the loan at their convenience, but before the tenure ends.
Tata Capital’s Flexi Loan, for instance, is the ideal personal loan plan that offers maximum flexibility, greater convenience and an array of features. With the plan, borrowers can access the fund without any additional charges. Lower interest rates, hassle-free repayment options and multiple withdrawal allowance make this flexi plan a popular choice for people.