Due to the financial instability induced by the unprecedented COVID-19 pandemic, businesses have shut down. A lot of people have either lost their jobs or have had to endure a reduction in their income. In such cases, you have two choices available to manage your finances during a cash crunch. You can use your savings or apply for a Property Loan to meet a financial requirement.
At times, even your savings are not enough to finance a medical emergency, your children’s higher education, and international travel, investment in the business, or your wedding. Therefore, applying for a property loan seems to be the best option to manage your finances without putting a lot of financial burden on your shoulder.
Factors which Decide Ideal Tenor for your Property Loan
- What is a loan against property?
A property loan or a loan against property is a secured loan that allows you to access funds immediately by pledging your property as collateral. In case of defaulting on repayments, your lender has the right to sell your property and recover the loan amount. Compared to unsecured loans, it offers a lower interest rate and flexible loan tenor.
While calculating your EMI via a mortgage loan EMI calculator, you will need to consider your loan tenor besides the interest rate and the principal loan amount. It is crucial to decide on a tenor within which you can repay the loan amount with interest without delays or defaults. It impacts the total cost of property loans.
So, while using the mortgage loan EMI calculator, you must assess your needs and evaluate your economic condition to determine the optimal time required to repay the loan amount.
Factors that play a significant role in deciding your loan against property tenor
- The interest rate
The interest rate is one of the crucial factors associated with a property loan. It is a percentage of the principal loan amount that you will need to pay the lender. One can say that it is the profit lenders earn by offering loans. It plays a vital role in deciding your loan against the property’s tenure. If you want to pay a lower interest rate on your loan, you must choose a shorter loan tenure.
- Loan amount
The loan amount you can get depends on the value of your property. Lenders are allowed to lend up to 90% of the property’s value as a loan. The loan amount you need has a direct impact on the tenor of the loan against the property. If you choose to get a higher loan amount, you will receive a long loan tenor. The benefit of having a longer loan tenor is that you can easily make repayments without any financial burden on your pocket.
However, it is worth noting that you will need to incur higher interest in the long run. Although your EMIs will reduce significantly, you will be paying high overall interest. If you have the budget, it would be wise to apply for a shorter loan tenure, as you can avoid paying higher interest. So, while calculating your EMI via mortgage loan EMI calculator, you must assess your needs and choose a loan amount that you need.
- Your age
Your age is one of the essential factors that help lenders determine whether to offer a shorter or longer loan tenor. For instance, if you are in your thirties, you will likely receive a longer loan tenure compared to people in their fifties, as you have a stable source of income and enough time to repay the loan amount. However, if you are in your fifties or sixties, it is better that you choose a shorter loan tenor because your income will reduce or stop after retirement.
You can use your lender’s online mortgage loan EMI calculator to evaluate your EMIs and choose a tenor that best serves your needs and preferences.
In short
A property loan is the best way to manage your finances without putting any stress on your savings or investments. However, you must consider several factors such as your income, age, and repayment capacity while choosing your loan against property tenure. You must ensure that you can repay your loan amount within the stipulated loan tenure.