How to Choose the Ideal Tenure for Your Loan Against Property?

A Loan Against Property (LAP) is when an individual offers assets such as a piece of land they own (residential or commercial) to obtain a credit facility. Financing your child’s education, expanding your business, or handling unexpected medical expenses soon requires selecting the best loan against property maximum tenure to make repayments more manageable.

A loan’s suitability also affects how much you are charged while making monthly Equated Monthly Instalments (EMIs). Now, let’s explore how these factors balance in this article.

Also Read: Loan Tenure: All You Need to Know

What Is The Ideal Loan Tenure?

Loan tenure is the period taken to return the loan amount through Equated Monthly Instalments (EMI). There are usually two options for long-term loans against property – namely short-term and long-term ones among Indian lenders:

• Housing Loans Maximum Tenure — It can take up to approximately fifteen to twenty years, depending on the lender.
• Minimum Time for Housing Loans — Sometimes as low as five years.

Option of tailoring a term that fits within one’s payback ability.

Factors To Consider Before Deciding Your Loan Against Property Tenure

Below are several things you need to look into when deciding how long you want to take before repaying your LAP:

1. Current income

People with higher and steady incomes can choose shorter terms to repay the money fast, hence reducing interest.

On the other hand, people working under moderate salaries find long-term choices lessen the EMI burden.

2. What is the exact EMI amount

A brief repayment period means higher EMI but less overall borrowing cost.

On the contrary, a longer-term loan leads to lower EMI but increased payment in the form of interest rates.

3. Age of the borrower

Young individuals might prefer taking more years in a home loan account because they may still be in employment many years ahead.

For senior citizens who are nearing retirement age, an optimum housing loan with minimum tenure is advisable so that they don’t have difficulties with their financial plans.

4. Interest rate and total outlay

The lengthier a loan goes on, the more the total amount to be paid becomes.

A shorter duration lowers the loan expenses; however, this comes with high monthly outgoings for you to manage your budget well enough within such an arrangement.

5. Purpose of the Loan

For business expansion or investment purposes, a long-term loan against property might enable you to earn more through other investments and repay it comfortably when you have raised the money.

A long-term solution seems right for uncertainties or when you don’t need much since this will save you money.

Also Read: 5 Things to Consider Before Applying for Loan Against Property

Short Tenure versus Long Tenure: A Comparison

When deciding between short and long home loan tenures, one should make the comparison as follows:

Reasons Your Choice of the Right Tenure is Important

These are reasons why you should go for an appropriate loan against property maximum tenure:

• Equitable EMIs — Stop stressing yourself with high monthly instalments that you can’t afford.
• Lower Cost of Borrowing — Interest payments over the period can be saved by selecting a shorter loan against property tenure.
• Financial Security — This would enable one to have a steady cash flow available for daily needs.

Advise on Selecting an Optimum Loan Duration

• Analyse Your Repayment Ability — Make a budget for your monthly income vs expenditure first, then compare it with the EMI payment obligation.
• Use EMI Calculators — Utilize these tools online by indicating the preferred EMI amount, the molecular weight of the compound & period to come up with the best possible combinations for any given loan application form filled automatically into required blanks with corresponding data.
• Consider Prepayments — Go for a longer term with the possibility of increasing the payback amount later through partial pre-payment plans when there is likely to be increased monthly earnings.
• Check Eligibility — Lenders’ application forms usually require information about age brackets, income streams, and types of assets owned before determining how much time someone has left before being qualified enough to get back invested funds.

The Bottom Line

The right home loan tenure, or LAP tenure, is a choice that is all about striking a balance between your monthly income and long-term financial objectives. A lower term is better if one wishes to quickly pay off the housing loan interest under current high rates.

Nevertheless, for someone who wants their monthly payments to be manageable, the best option should be extending the period of the home loan repayment installments. So, use an EMI calculator and discuss it with your loan officer to make a wise decision.

Do you want a loan today? Apply online now and achieve your financial targets quickly.

Also Read: What is Loan Against Property? - Features, Eligibility, Documents, and more.

FAQs

Q.1. How do you decide on tenure for a home loan?

A. The tenure you choose must depend on your needs and your ability to repay the loan amount. Consider your housing requirements, costs, and personal finances while deciding on the home loan tenure. If you are confused, you can seek professional help and understand the nuances of choosing a specific tenure.

Q.2. How do I choose a loan tenure?

A. Assess your monthly cash flow and ensure that the EMI payments don't strain your budget. Avoid opting for a longer home loan tenure solely for lower instalments if it means paying significantly more interest over time. Find a tenure that strikes a balance between affordability and minimizing interest costs.

Q.3. What is the best time period for a home loan?

A. The length of a home loan can range from 2 years to 30 years. You will pay a higher EMI amount if your loan is for a shorter duration. On the other hand, you’ll pay less in EMI if you go for a longer home loan tenure.

Q.4. Is it good to reduce home loan tenure?

A. The EMI amount is higher for a shorter home loan tenure. However, the outgoing interest rate is also lower. As a result, the cost of borrowing is lower, and, thus, the overall property cost is lower.

Q.5. What is the maximum loan tenure on Loan Against Property?

A. Loan tenure varies from lender to lender. At Godrej Capital, you can get a high loan tenure of up to 30 years.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com