2024 Guide: Flexi Term Loan vs. Flexi Hybrid Loan - Make the Smart Choice

Are you wondering which Flexi loan option is suitable for you? With loans now an essential part of day-to-day personal finance, banks and other financial institutions have started offering various loans specifically catered to your needs. Whether you are looking to opt for a loan to purchase a house, fund your child’s education, or for any unforeseen expenditures, there’s a loan option available for you. Flexi Term Loans and Flexi Hybrid Loans are two popular choices, both offering distinctive features and benefits.

This blog will provide you with detailed information on Flexi Loan vs Hybrid Loan to help you make an informed decision.

Understanding Flexi Term Loans

Flexi Term Loans grant you the flexibility to tweak the loan repayments according to your financial situation. While the traditional scheme of term loans involves a pre-scheduled repayment program, a Flexi Term Loan makes it possible for you to make prepayments or lump sum payments towards the initial amount, thus reducing the total interest over the loan tenor. This aspect is quite good for people with irregular income and those expecting significant funds at certain rates.

One of the major benefits of Flexi Term Loans is their flexibility in accommodating fluctuations in cash flow without incurring expensive penalties or more fees. You can pay before the due amount when possible and bring the loan duration down, which saves them from interest accumulation. Moreover, several lending institutions allow users to redraw funds from the prepaid amount, thereby giving them access to capital in a crisis.

However, it must be noted that a Flexi Term Loan attracts a higher interest rate than a conventional term loan. This is to keep up with the lost flexibility and reduced interest income for the lender if you repay the Flexi loan early. Although you enjoy the opportunities to repay your debt on favourable terms, you have to consider the financial aspect before choosing this specific type of loan.

Understanding Flexi Hybrid Loans

Flexi Hybrid Loans provide a blend of benefits from normal Term Loans and Flexi Term Loans, catering to your needs in the best way possible. With a Flexi Hybrid Loan, you have the option of repaying prematurely up to the principal amount, almost like with Flexi Term Loans. Moreover, you can make interest-only payments that are only applicable for the first several years of the entire tenure period of the loan.

A period of interest-free payment gives you an opportunity to catch up on your cash flow and overcome financial difficulties in the initial stages of the loan. This may be especially helpful for individuals who expect their income to grow in the future or who are looking for other avenues where their excess funds can earn more. Furthermore, you are at liberty to choose between interest-only periods and principal-plus-interest repayments at your convenience.

A noticeable advantage of Flexi Hybrid Loans is the ability to optimise tax benefits. Ideally, during the initial year, you could choose interest-only repayments and later on can take full advantage of the tax deduction on home loans under section 24 of the Income Tax Act, 1961. Subsequent to this, while applying for principal-plus-interest repayment, you can enjoy tax benefits on the principal amount (as per Section 80C) as well as the interest amount.

Comparative Analysis of Term Loans: Flexi Loan vs Hybrid Loan

Now that we have gone over the characteristics and advantages of the Flexi Term Loan and the Flexi Hybrid Loan, we shall assess and state which of the two will be better for you.

1. Flexibility: Both loan types show a great degree of flexibility in the repayment schedule. However, Flexi Hybrid Loans offer the advantage of interest-only or principal-plus-interest repayments and take flexibility another step forward by letting people decide how to pay, adapting to the scope of available funds.

2. Interest Rates: Flexi Term Loan rates may be slightly higher compared to a classical term loan, but Flexi Hybrid Loan rates are usually affordable and compete with most term loans in the market, making them a great option for borrowers looking to reduce their borrowing costs.

3. Tax Benefits: Flexi Hybrid Loans are superior in the tax aspect, particularly through the phase of interest-only payment. Tax-effectiveness can be leveraged using higher deductions for home loan interest paid, which can lower the tax liabilities and thereby lead to better savings.

4. Cost Implications: Applicants should calculate the costs associated with both loan types and consider additional variables, including interest rates, extra charges, and early repayment penalties. Even though the flexibility of repayment in Flexi Term Loans can be a great option, people may eventually pay more in interest over the loan tenure than they would with a Flexi Hybrid Loan.

How to Calculate Flexi Term and Flexi Hybrid Personal Loan EMIs?

You can use our online calculator to estimate your repayments. KreditBee’s Flexi Hybrid loan calculator helps you assess interest-only EMIs during the initial period and factor in the total loan amount for later stages. Flexi personal loan calculators provide a straightforward estimate of EMIs considering the entire loan amount and interest rate. Loan calculators are indispensable tools for planning your loan and budgeting for repayments.
To use our Flexi personal loan calculator, follow these steps:

1. Enter Your Loan Details on Our Personal Loan Calculator: Input necessary loan details, such as the loan amount, interest rate, and tenure, into the calculator.

2. Check Your EMI: The tool will generate your EMI so that you can gain immediate insights into your repayment obligations.

3. Compare Loan Scenarios: Explore various loan scenarios by adjusting parameters like loan amount or tenure to make informed decisions.

Conclusion

In conclusion, Flexi Term Loans and Flexi Hybrid Loans both offer various benefits to borrowers who desire to have control and flexibility in terms of their repayment plans. Flexi Term loans offer the advantage of being able to make prepayments and redraw as frequently as required, and Flexi Hybrid Loan products combine the features of flexible repayments with potential tax savings.

Lastly, the individual preferences, financial objectives, and risk tolerance of an individual should be taken into account when picking a loan among the two types. You must carefully assess the advantages, benefits, and consequences of prices for each choice to make the right decision. By carefully selecting the appropriate loan type and arranging repayments wisely, you can successfully tackle your debt and build a better financial future.