Equal Principal Repayment
Equal Principal Repayment (EPR) is a loan repayment plan designed to evenly distribute the repayment of a loan over its entire term. As opposed to other loan repayment options, such as the “principal and interest” repayment plan, EPR repays the principal, a portion of the interest, and a portion of the remaining principal each payment period. With EPR, borrowers make the same payment every month throughout the loans maturity period.
The main benefit of EPR is that it spreads out your payments over the life of the loan in order to avoid large peaks or valleys of debt, so you can better manage your budget. With an EPR loan, you pay off most of the loan principal early on, with much smaller amounts toward the end. This could be a benefit if you begin to have income challenges later on in life.
Another advantage of EPR is that it can help you save money on interest. Because you are paying down the principal of the loan through each payment, you are paying less interest each month as the outstanding balance of the loan decreases. As a result, you may pay off your loan quicker.
EPR is a great option if you want to save on interest payments while predictably reducing your loan principal and making steady progress toward repaying the loan. However, EPR has some drawbacks that you should consider before choosing this loan repayment option.
The main disadvantage of EPR is that it can take longer to fully repay the loan. Because you are reducing the loan principal on each payment, it may take longer to pay off the loan in full. This can also mean higher expenses over the life of the loan due to interest costs.
It is also important to note that some lenders do not offer EPR loans. Most traditional lenders offer only the principal and interest repayment plan for the majority of their loan products. However, certain lenders do offer EPR loans. Be sure to shop around—online lenders are typically better equipped to offer EPR and other alternative repayment plans.
EPR is a great option for those who want to have a fixed payment each month. It can also be a good choice for those who need regular, predictable payments to help manage their budget or who want to minimize their total interest expense over the life of the loan. It is important to understand the pros and cons of EPR and shop around for the best loan terms to get the most out of your loan.
