How are EMIs structured for used car loans with bullet repayment options?

When you select bullet repayment for a used car loan, your EMI structure will differ from a standard loan. With standard loans, your EMI will repay both principal and interest throughout the loan duration, whereas you usually only repay the interest each month during the loan duration, and then at the end of the term you will be making one lump sum payment to repay the principal portion. That one lump sum payment is referred to as the 'bullet payment.'

Bullet repayment gives you some flexibility if you want to keep your monthly repayment lower, and you expect to receive a major injection of cash at some time in the future (work bonus, business profit, investment maturity). It definitely adds space into your monthly budget, however, keep in mind that the final payment for the principal will be very large.

Here are some considerations when looking at bullet repayment options:

Lower regular EMIs - As you are only repaying the interest each month, your payment will be much lower in dollar terms than a standard EMI option.

Large final payment - The entire principal will be due at the end, so it is vital that you have a plan to make that payment for when it is due.

More interest paid - Your principal will remain unpaid, on which the interest is charged, so you will likely have more total interest paid compared to a standard EMI option.

Tight finances - There is a chance that you could be in a situation of financial distress or even default if you are unable to arrange the lump sum payment when the loan reaches the end of its term.