A loan against property makes one of the best ways to gather essential funds. From financing a new business, funding your destination wedding to tackling a sudden financial emergency, loan against property is an extremely useful form of loan. As the name suggests, a loan can be availed through the use of property as collateral. It is a secured loan and thus, you pay a much lower rate of interest while being able to avail a higher loan amount.
With every kind of loan, it essential to closely consider the tenor for repayment. This is because it can impact several other relating factors of the loan. Here are some ways that you can use to help with determining the ideal loan tenor when taking a loan against property.
Principal loan amount – The tenor of the loan is directly driven by the amount you loan. Most banks grant you a longer tenor when the loan amount is higher. On the hand, you are given a shorter time period to fulfil the repayments when the loan is of lesser value. A longer tenor will ease your financial pressure and also help you manage your budget more effectively. However, if you wish to close your loan faster and can smoothly make the repayment, then a shorter tenor is a good option. Typically, banks let you choose from 2 to 20 years as a tenor period.
Age of the applicant – Age is a crucial aspect considered when arriving at the ideal tenor for your property mortgage loan. When taking a loan in the younger years such as in your 20s or 30s, a longer tenor is ideal as you will have enough time to repay the loan. However, if you are in your middle age or nearing retirement, banks offer you a shorter period of time to complete the loan.
Stability of income – You must evaluate the total income of your household each month when picking the right tenor for mortgage loan against property. In the case of lower or fluctuating income, it is advisable to opt for a longer tenor as it will spread out the EMIs.
Rate of interest – Finally, the rate of interest on the loan poses to be a major determining factor. A shorter tenor will let you avail of lower interest rates on your EMI. You payout higher interest rates with a longer tenor but it all comes down to your repayment convenience.
A loan against property brings with it several benefits that include a simple documentation process, use of any kind of property asset and flexibility with the usage of the finance. Choosing the right tenor coupled with other aspects such as a reputed financing company and will make the process smoother.
