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Bespoke loans: Know everything about EMI Free Loans

Availing loan from banks or NBFCs is easy if you have a good credit profile. The problem lies in repaying monthly installments regularly due to fixed salary income and fluctuating budget. 

A substantial part (about 80 to 90 percent) of the salaries of junior to mid-level executives goes towards rental, groceries, and travel expenses, leaving only a couple of hundred rupees for loan servicing. Millennials are often stressed about their EMI dates and frequently end up borrowing from friends or office colleagues to serve their EMIs.

This tense situation, however, can be addressed with EMI-free loans, where the committed monthly outflow is a nominal ₹1500 per lakh of the loan.

What is an EMI-free loan?

EMI stands for equated monthly instalment, which is a sum of the principal payment and monthly interest. But under EMI-free loans, it is not mandatory for the borrower to pay the principal every month. Only the monthly interest is needed to be paid every month electronically, while the principal can paid at the convenience of the borrower either quarterly, half-yearly, in bullet payments, or as a lump-sum amount, depending on the borrower’s cash flow.

EMI-free loans are available for periods ranging from 1 year to 5 years with minimal paperwork. The cash is transferred into your account within 36 hours of submitting the loan application.

Why should one take it?

Monthly payment obligation under EMI-free loans is 40% lower than a standard personal loan (calculated for 5-year tenure). This can be absorbed easily in your monthly expenses with minimal impact on the cash flow. Lower monthly commitment also means reduced chances of loan default and better credit score.

For example, the monthly interest payment on a personal loan worth ₹2 lakh at 15% will be ₹4756. On the other hand, a borrower will only have to pay ₹3000 per month at 18% under an EMI-free loan, which reduces your monthly outflow. The principal can be paid later in bullet payments when you create sufficient financial flexibility for yourself. There are no prepayment charges with such loans, which gives you complete control over the repayment plan.

And ‘how’ exactly are they different?

The monthly commitment of a typical EMI-based loan remains the same during the entire loan tenure. Such loans are calculated as per the reducing balance method. This means that a larger portion of your payments goes towards the interest during the initial months as compared to your principal amount.

This problem gets resolved when you choose EMI-free loans. Any payment in addition to the interest will bring down your loan outstanding. This will decrease your overall liability while also reducing your monthly interest for the subsequent month, enabling better overall savings.

‘Where’ can I get such loans?

Such loans can be easily availed on few tech-driven lending platforms. All you need to do is fill your information online, download documents as per the checklist, and book an appointment with the company representative as per your convenience. Sign the documents mentioned in the checklist and hand them over to the representative upon his or her visit. Since such technology-driven state-of-the-art platforms have swift loan origination processes and quick disbursal, the loan amount will reflect in your bank account in about 36 hours of handing over the application.

‘When’ can I prepay the EMI Free Loan?

EMI-free loan is one of the most flexible loan products available in the market today. It gives you a principal-free period of 6 months for which you do not have to worry about principal. After six months, you can make an online loan closure transfer of the credit outstanding. This will lead to loan closure and the NOC will be extended to you by the lender.



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LoanTap is a fintech platform delivering flexible EMI free loan products to salaried professionals. It uses technology to deliver smart and innovative products for millennials. Borrowers can choose custom- made loan products from an array of offerings like Overdraft Facility, Credit Card Takeover Loans, Rental Security Deposit Loans, Advance Salary Loans and consumer durable loans. Registered as LoanTap Credit Products Pvt. Limited with RBI, it is an NBFC offering unique products and features within the regulatory guidelines, thereby ensuring a fully transparent pricing structure. Headquartered in Mumbai and operational in Pune as well, LoanTap was incorporated in the year 2016 by ex-banking professional Satyam Kumar and former tech professional Vikas Kumar. The duo felt a constant need for credit solutions in the upwardly mobile salaried segment for acquiring assets or for personal consumption. They wished to re-define the retail asset distribution model by eliminating the information gap between producer and consumer and break the clutter of direct sales agents and brokers driven by short-term goals. Hence they integrated their respective specialisations in retail loans and technology domains for 17-18 years each to create a consumer-friendly credit facility in the competitive fintech space. Following an agency-based collection model, the online platform in its first phase has ventured into the low delinquency salaried segment that is characterised by a job experience of merely 2-5 years. The company manages to stand out for its speedy disbursement of loans with an average amount of Rs 4 lakhs within 15 days to 5 years. It also makes a pitch for flexible single and bulk payments that are convenient and cost-effective. Moreover, by being 100% online, it uses minimal human interface to verify the algorithms for predicting loan amounts. With a team of expert professionals manning its operations that includes retail asset and tech professionals with proven track records and CEOs / MDs and CFOs with leading FIs and European giants, LoanTap draws on cutting-edge technology to guarantee a world-class loan origination and management system for its target audience. The online platform has recently closed its first round of funding. Currently focussing primarily on upwardly mobile salaried professionals, LoanTap envisions penetrating deeper into the salaried segment. It eventually aims at tapping the MSME sector with an average loan size of Rs 6 Lakhs by expanding in the top 10 cities of the country and reaching a book size of INR 750 crores in the next 3 years.

Stories by Satyam Kumar