Loan Tenure: All You Need to Know

Cashflow management is crucial for many businesses, especially small businesses. Most micros, small and medium enterprises (MSMEs) have to avoid all cash flow shortages that could disrupt the business for the venture to succeed.

Also Read: How to Get a Business Loan for Better Cash Flow

Why is Loan Tenure Important?

Loan tenure is important because it decides the monthly EMI payment you will commit to. You can choose to go for a longer or a shorter loan tenure, depending upon your financial convenience. With many lenders, such as Godrej Capital, you can get a loan tenure starting from 5 to 30 years, depending on the type of loan. It's really up to you! But make sure your monthly repayments are on time so you can have a good credit score for Loan Eligibility.

Why is Choosing the Right Loan Tenure Important?

Loan tenure directly impacts your monthly EMI. So, if you go for a long-term loan, you will shell out less cash for your monthly EMI payment. The longer loan tenure makes loan repayment easier because it lowers the EMIs as the loan amount is spread out over a more extended period, easing the financial strain on your monthly budget. Additionally, a longer tenure raises your eligibility for a larger loan. However, if you go for a shorter loan tenure, you may, depending on other factors, enjoy lower interest rates but you will be shelling out more money comparatively.

Shorter loan tenure vs Longer Loan Tenure – Pros and Cons

Shorter Tenure:

• Pros: You'll be debt-free sooner, minimizing the long-term financial burden. Lower overall interest payments can save you a significant amount in the long run.

• Cons: Higher EMIs can put a strain on your monthly budget, potentially restricting your ability to save for other goals or handle unexpected expenses.

Longer Tenure:

• Pros: Lower EMIs free up more cash for other financial needs, offering greater flexibility in your budget.

• Cons: You end up paying more interest over the extended repayment period. The longer you're in debt, the less financial freedom you might have.

Factors that Affect Loan Against Property Tenure

A Loan comes with a few terms and conditions. You have the freedom to choose your loan tenure, but your loan eligibility also depends on various factors like:

#1. Age: Your current age and income will largely determine the length of the loan. You can choose a long loan tenure if you are in your 20s or 30s. But, if you choose to take a loan while you are getting close to retirement age, you should choose a shorter one because your income may halt or decline.

#2. Income: Your net income and expenses will also affect the loan tenure. Choosing a shorter loan tenure is good if you have a high and timely income. But if your income is erratic, it is good to go for long-term tenure. This will also aid you in protecting your CIBIL score.

💡Pro tip: Use loan EMI calculator to determine your monthly EMI payments and make budget planning easy. Click here

#3. Interest Rates: Loan interest rates and the accompanying EMIs are critical factors in determining the loan's term. The interest rate impacts the EMIs on the loan amount. As I already mentioned, opt for a long tenure if you want low EMIs. Or choose a short tenure and save money on interest if you are okay with making higher EMI payments.

#4. Loan Amount: The loan tenure depends on your required loan amount. Your loan tenure will be longer if you go for a larger loan. But make sure you have a good credit score.

Also Read: What Can You Do To Improve Your Credit Score

So, what will your choice be? Longer repayment tenure or a shorter one? Well, whatever you choose, choose well!

Cash Flow Management Tips for Loan Takers

• Create a budget: Track your income and expenses to understand your financial capacity for loan repayments.

• Build an emergency fund: Having a safety net helps manage unexpected expenses without jeopardizing your loan repayments.

• Explore prepayment options: See if your loan allows prepayments to reduce the principal amount and save on interest.

By understanding loan tenure and its impact on cash flow, you can make informed decisions. Responsible borrowing empowers you to achieve your financial goals without getting swept away by the tides of debt. So, choose your loan tenure wisely, and sail smoothly towards financial freedom!

Ready to take control of your finances? Apply for a loan today and achieve your financial goals!

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