Taking a loan is a serious decision because it has long-term implications. No matter the loan type, it will take you some years to finish the repayment. How many years would you get as a first-time applicant, you wonder? Well, that depends on your repayment ability, your credit score, and other factors.
Before agreeing to the terms of a loan, such as a loan against property, you must ensure that the tenor satisfies your needs. If you desire to close the loan early, opt for a short tenor. If you want to spread the payment of the equated monthly instalments (EMIs) across many years, you can request a long tenor. Whatever option you choose, base the duration of your loan only on your needs.
A loan tenor refers to the timeframe within which a financial institution expects you to repay a loan amount. Repayment is done in EMIs which contain the principal amount and the loan against property interest rate.
Being a secured loan, a loan against property is a long-term loan that you can obtain provided that you belong to either of the following categories:
Some of the factors that lenders consider before approving a mortgage loan tenor in India are:
1. Your Age
Your age is important because lenders request that you include proof of age as part of the loan against property eligibility criteria. This helps them determine the maximum amount that you can obtain and the exact repayment tenor.
If you are in your youth, you can avail of a high loan amount with a maximum loan tenor of 18 years. However, if you are close to retirement, you can only avail a low amount and a short tenor.
2. Ongoing Financial Obligations
Lenders consider your ongoing financial obligations before approving a mortgage loan tenor. If you already have many obligations, you cannot access a longer repayment tenor.
3. Your Property
Lenders will consider the age, location, and market value of the property that you provide as collateral before offering you a repayment tenor.
If you have an excellent credit score and a healthy credit record, here are three good reasons to choose a long tenor:
1. Easy Repayment
We advise you to opt for a longer repayment tenor because you can spread the payments over many years, thereby reducing the EMIs. If you have other financial obligations or want to save money, then go for a long tenor. The low EMIs provide you with spare cash to either cover other living expenses or strengthen your savings.
2. Loan Against Property Interest Rate
If you opt for a longer repayment tenor and are on a floating interest system, you are protected from market fluctuations. Imagine being on a floating interest rate and a short tenor during an abrupt rate increase. You would pay triple on interest and empty your savings as a result.
3. Option of Loan Refinancing
With a long repayment tenor, you can opt for a balance transfer of your loan to a new lender to enjoy their benefits.
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Last update on 11-Mar-2021
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