Do you wish to apply for a home loan? If yes, you need to indulge in careful planning. As the loan amount is generally quite substantial, the financial responsibility is also equally huge. To enjoy a seamless repayment experience, please try borrowing as wisely as possible. Learning about the core elements of home loan finance and understanding how to select the correct home loan tenure is a great first step.
The tenure is the window in which you must repay the loan together with the EMIs. Many modern-day lenders let you go for a tenure that ranges up to approximately 30 years, which is sufficient time for repayment. This may seem like a safe route, but there are both pros and cons. To understand better, please check out the rest of the discussion now.
Factors that Determine the Home Loan Tenure
- Maximum Tenure
The maximum tenure helps you understand the lowest EMI. Suppose you chose the tenure of 30 years. This means you have ample time to repay the dues, but remember, you also have to pay interest for those many years. So, the longer the tenure, the pricier the loan.
It would help if you had a clear idea about the repayment goals at this stage. If you wish to prioritise comfort and are not concerned about the increased interest, please opt for the maximum tenure. Your EMIs will be as low as possible, and you do not have to rely on your personal finance to take care of them.
- Short Tenure
The experts providing LIC home loan said short-term loans have a tenure of five years. The repayment window is a lot shorter, but it has both advantages and disadvantages. As you will pay off the loan over a short period, you do not have to pay much interest, which reduces the overall cost of the loan. However, to repay the loan in a short period, you have to increase the EMIs.
In the case of a short-term loan, you get the opportunity to save. However, going after savings without strategic planning is a thoughtless action. To keep the interest minimal, your EMIs may go beyond control. This leaves you vulnerable if your income suddenly drops or you have to finance emergencies.
Go for short-term loans only if you are financially strong and can manage large EMIs without hassle.
- Medium Tenure
Medium-term loans let you opt for a tenure between 15 and 20 years. Within this particular bracket, the interest varies little. If your personal finances allow, you may find the best tenure and save enough money while repaying.
Choosing a suitable home loan tenure requires preparation and time. Once you chalk down the factors above, you may use the EMI calculator to identify the best option. You may have to change the tenure a few times to arrive at what you desire. You may increase the EMI and decrease the tenure even down the road as you begin the repayment. It is best to appoint a lender who ensures flexibility.