Choose Flexible Property Loan Tenor to Financial Freedom
Loans against property, also known as property loans, are loans availed of against a residential or commercial property or a piece of owned land. The property serves as security for the loan and the lender can sell the property for loan recovery if the borrower defaults on loan repayment. It is, thus, that borrowers are advised to borrow money by pledging a property as security only after proper planning and when they know that loan repayment will not be a problem in any way.
Here are a few things you must keep in mind if you are planning to avail of a property loan. First, loans against property borrowers must research well and try to get the lowest interest rate possible. This will help keep EMIs within the budget and reduce chances of defaulting on loan repayment. Further, borrowers must use a loan against property eligibility calculator and EMI calculator to work out the loan amount they can easily repay. In the case of loans against property, since there is a collateral involved, borrowers must only borrow what they can easily repay. Lastly, borrowers must choose their property loan tenor carefully. This article shares with its readers some tips on how borrowers can select the right property loan tenor for them.
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Tips on How to Choose the Right Property Loan Tenor
1. Keep Your Loan Tenor as Short as Possible While Keeping Your EMIs as Affordable as Possible
There is an indirect relation between the loan tenor and EMIs. A long loan tenor leads to low EMIs. On the other hand, a short property loan tenor leads to high and sometimes unaffordable EMIs. Unfortunately, though a long loan tenor helps one keep their EMIs within the affordable range, it also increases the total interest outgo and the cost of borrowing the loan. Thus, borrowers must try to strike the right combination between loan tenor and loan EMIs. They should keep their EMIs as affordable and their loan tenor as short as comfortably possible.
2. Keep Your Retirement Age in Mind
Most lenders have strict loan against property eligibility criteria. These eligibility criteria are designed to reduce chances of loan default. One of the factors that affects property loan eligibility is age. To be able to avail of a loan against property in India, you must be between 23 and 65 years of age. The maximum age is always the age of the applicant at the time of loan maturity.
Young borrowers have more working years ahead of them and therefore, are less likely to default on loan repayment. Thus, lenders prefer to lend money to young borrowers. If you are a young applicant, you can opt for a long repayment tenor. However, if you are nearing retirement age, keep your loan tenor short so that you do not exceed the age limit at the time of loan maturity as this will lead to your loan application getting outrightly rejected.
3. Use a Loan Against Property EMI Calculator
A loan against property EMI calculator is an online tool that borrowers can use to figure out the EMI they will have to pay for the loan amount they wish to borrow. The calculator asks borrowers to enter only three details: desired loan amount, desired loan tenor and the rate of interest being offered. Once a borrower enters these values, the calculator gives them the EMI they will have to pay each month. If borrowers know the EMI they can afford and the loan amount they want, they can use the loan against property calculator to easily figure out the right loan tenor for them.
4. Keep Your Future Aspirations in Mind While Deciding Your Loan Tenor
Most loan against property borrowers want to become loan-free and debt-free as soon as possible. Thus, they try to take on the responsibility of as high EMIs as possible. However, this is not always the right approach. You must sit down with a retirement planner and develop an understanding of where and how much should you invest your money to get the returns you want and be able to retire without any worry or stress. This will help you decide better the EMIs that you can afford and the loan tenor that will work best for you. If you want to invest money somewhere, you must keep your loan tenor long and EMIs low so that you have enough money left at the end of each month to take care of your other investments.
Final Words
Loans against property are a safe and convenient way of raising money. However, since these loans involve a collateral, they must be availed of after careful planning. Further, if a borrower is not happy with the property loan interest rate on which they are repaying their current loan or the loan tenor they had opted for in the first place, they can go for a property loan balance transfer. A property loan balance transfer refers to the process of transferring one’s loan from one lender to another offering better loan terms and conditions, such as lower interest rates or the option to change one’s loan tenor. However, loan against property balance transfer involves a fee and therefore, one must avail of this facility only if the savings facilitated by the service are enough to cover the cost of transfering the loan and build some savings too. Keeping the tips mentioned in this article will help you take right decisions regarding your property loan and also pay off the loan easily.
