How To Calculate Ideal Tenure For Your Loan Against Property?

How To Calculate Ideal Tenure For Your Loan Against Property?

When applying for a Loan Against Property, it is important to thoroughly research your options. Usually, the loan amount is sizeable and adds to your financial responsibility. That’s why it is recommended that you borrow wisely and cost-effectively. When you do that, your repayment experience will become hassle-free. One of the most important decisions to make is to choose the tenure of the loan.

In simple terms, loan tenure refers to the period during which the loan must be repaid through Equated Monthly Instalments (EMIs). Typically, the maximum tenure for a Loan against a Property or mortgage loan is 15 years.

You need to decide what tenure would suit you. Can you afford to go for a long-term loan or short-term loan? And how can you pay less interest?

What can influence your loan tenure?

Loan amount

The amount you need to take as a Loan Against Property is one of the biggest factors that influences your tenure. If the loan amount is higher, the tenure may be longer. Though longer tenure makes EMIs more comfortable, you end up paying a lot more to the lender.

Your age

If you are in your 20s or early 30s, a long-term loan may be a good option for you. However, if you are in your 50s or 60s, a short-term loan would be a better option since you would be approaching your retirement age.

Rate of interest & EMI

If you want a lower outgo, you should opt for

Long Tenure Loans

Many people go for the maximum tenure when applying for a loan. This ensures the lowest EMI for them. For instance, if a lender offers the maximum tenure of 15 years and you opt for it, your EMI amount will reduce but your total =interest outgo will be more. You will be paying interest for 15 years. This means, that the longer the repayment tenure the more the loan will cost. While this works for some, it may not be a very wise decision for others. If comfort is important to you and you’re not bothered by the higher interest outflow, you may want to opt for the longest loan tenure available. Consequently, your EMIs will be as low as they can be in accordance with the loan terms, and you will not have to strain your personal finances to pay them. At the end of the day, it is important that you choose a tenure that you find comfortable.

Short Tenure Loans

Short-term loans have a tenure of about 7 years. This means you have to repay your loan in a much shorter span of time. A short-term loan also comes with its own set of advantages and disadvantages.

Because you pay back your loan over a shorter period of time, you pay less interest, reducing the total loan cost. In order to repay the loan within a short period, the EMIs are much higher as compared to long-term loans. Choosing this option allows you to save more, but it’s not smart to chase savings without a strategic plan. You may have difficulty managing your EMIs if you try to keep your interest costs low.

In case your income decreases or you might need to cover an emergency, this would place you at risk of defaulting. Plan better and go for a short-term loan only if you think you can manage the EMIs without a lot of pressure. During a cash crunch, having surplus savings to pay EMIs is a good alternative.

Medium Tenure Loans

A medium-term loan would be around 10 years. This is like a safe space for people who don’t want long-term or short-term loans. In a medium-term loan, the interest outflow varies a bit.

Choosing the right loan tenure is definitely a process that takes time and preparation. Keeping in mind the above factors can help make things easier. Once you consider all the factors, you can use an EMI calculator to make the final decision. With the help of tools like an EMI calculator, you get a clear understanding of the outlay, EMIs due, and interest due. It is important to note the pros and cons of the loan tenure as per your financial ability and repayment goals. You can also ask your lender to increase the EMI amount and reduce the tenure, even after a few years.

Thus, it is best to gather all information about the lender and their services. In the end, the tenure decision is all yours and whatever you feel comfortable with.


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