Home Loan Repayment Options
An NRI has several options to repay a home loan
As per norms prescribed by the RBI, NRIs have several options for repaying home loans:
- Post-dated cheque (PDC) for the EMI value, generally issued at the time of availing a loan
- Standing instruction (SI), issued to the NRIs' bankers to pay the EMIs through ECS (Electronic Clearing System) from his/her Non-Resident (External) Account / Non-Resident (Ordinary) Account held in India
- RBI permits NRIs to repay their home loans by close relatives in India
With regard to repayment of their home loan, NRIs could note the following:
- For loans availed in part, only interest on the amount disbursed needs to be paid; the regular EMIs fall due only after a loan has been disbursed fully; payment can be made through any of the above options; the interest payment for the partially disbursed loan amount fall due every month
- For fully disbursed loans, repayment can be made using any of the options mentioned above; however, for SI, borrowers are required to execute a Direct Debit Mandate in favor of the lending institution as per their format
- Part-prepayments can be made during the tenure of a loan, without having to incur any extra charges; part-prepayments bring down the outstanding principal amount of a home loan by the amount paid; future interest is then calculated only on the outstanding loan principal and helps to either lessen the tenure of a loan or the monthly installment
In case a loan is pre-closed by means of prepayment, lending institutions usually levy a charge as a percentage of the outstanding loan principal, and all prepayments made in the 12-month period preceding the loan pre-closure.
