How to Calculate Balloon Payment EMI ?

Know to calculate Balloon Payment EMI in Loans i.e. Mortgage Loans, Property loans, Home loan or Loan against Rent Receivables – The Balloon payment is defined as the lump sum payment which is made along with the last EMI of the loan. This payment is usually made towards the end of the loan period. The last payment of the EMI or the principal amount or Balloon payment will always be higher than the regular loan EMI on a monthly basis.

Are you really interested in getting the easy loan against the rent receivables ? Get it from Canara Bank at cheapest Rate of Interest with flexible EMI option.

Interest Calculation in Balloon Payment

Balloon payment is provided by the bank with both the option of repayment i.e. fixed as well floating rate of interest. The loan is repaid with lower EMI and leftover principal is being paid during the end of the amortization. The interest component of the loan is fully paid where as principal is being shifted later.

The best part about balloon payment is that they have lower initial payments. They are ideal for companies or borrowers who are having seasonal income and facing short term cash crunch, but expect the liquidity to improve in the future.

Example of Balloon Payment EMI :

It is majorly seen in the rent receivables loan where the Quantum of the loan is fixed based on the Rental income. The loan amount is fixed after considering the future receivables also. The EMI for the loan is fixed based on the initial rent receivables and not the future rent where it is proposed to be hiked (revision of the rent after certain fixed period or option period).

If there is balloon payment involved then, the EMI will be fixed based on the different stages of higher rent receivables and the borrower will be eligible for the higher quantum.

Usually, the entire principal payment is paid in lump sum towards the end of the term. The sum total payment which is paid towards the end of the term is called the balloon payment.

Customers find it convenient to make a balloon payment, especially those who do seasonal jobs and expect strong cash flows before the loan term expires like Lease income, rent received from the companies etc.

Features of Balloon Payment EMI

1. Balloon payment is the Lump-sump payment of loans majorly in Mortgage Loans or Loan against Rent receivables.
2. This is used by various banks as Step Up EMI if the monthly Interest repayment is higher
3. Balloon EMI payments are generally available for shorter period loan, majorly in Rent receivables.
4. It is extended mainly to the companies or Individual with short term cash crunch and expectation of income in particular months or generally to seasonal income.

Pros and cons of Balloon Payment EMI