Decoding Rest Period in Home Loans

Dev Singhraha

Relocation Expert

You look for your dream home; you find the perfect one and then comes the crucial task of getting a home loan! The loan part is the most complex and the technical part of the entire process wherein a lot of research and thorough understanding is required. There are various financial institutions in India and all of them offer home loans to buyers thus making the process of owning one’s own house a house an easier process. But it is chiefly advisable that a person must understand and have knowledge about the terms and conditions which are applicable to various loans.

To have a limpid clarity about the various home loans, one must essentially need to understand the very concept of ‘REST PERIOD’. Well, a rest period is said to the interval wherein the balance of a loan amount is to be recalculated. In cases of reducing balance loan amount, this term is applicable. A rest can be yearly, monthly or else daily.

Let us look at what the three rest period imply -

First is the ANNUAL REST, in which although one tends to pay the EMI's, the amount of loan is based on the amount of which the rate of interest is paid is recalculated only after the end of the year. Hence, here a borrower ends up paying an interest on the same amount of loan, even though the outstanding amount of loan tends to reduce every month.
The second one is the MONTHLY REST, wherein the left out amount of home loan tends to be calculated every month, not like the annual rest. The balance amount here reduces every month. In the monthly rest, the borrower gets a benefit as the rest matches the frequency of the loan repayment of the borrower.
The last one is the DAILY REST; this rest is not really chosen by the salaried employees. The rest is said to be more convenient and easy for the people who are self-employed and who tend to receive a regular amount of income at intervals.

Carefully understanding the repayment schedule and the frequency of one’s loan repayment a person should select the rest period. And based on the frequency of loan repayment one can go for a monthly, yearly or a daily rest option. For instance, for a monthly mode of repayment, it is advisable to a borrower to go for a monthly rest period as the interest here will be less as compared to the annual period of rest. Mostly the financial institutions charge a rate of interest which is an annualised rate which can be converted into a daily or monthly rest period accordingly.

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