Loan against property can be used for any purpose. While availing loan against property, you are not required to specify or commit for the particular end use of funds borrowed. You can use it to fund your business, for a long trip with your family, for meeting an unforeseen fund requirement, for wedding expenses, etc.
For meeting the requirements as mentioned above, you have two options, you can either opt for an unsecured loan or apply for a secured loan against your property. In case of unsecured loans, you will be paying a higher interest rate than secured loans. Also, the chances of getting an unsecured loan are slim as compared to the secured loan.
The tenure of loan against property is something that you can decide as per your own convenience. There are some key factors that you must take into consideration before deciding on the tenure of your loan against property.
1. Loan Amount: Higher the loan amount longer is the tenure. This system distributes the loan amount through a longer period, which in turn reduces the amount of monthly burden you have to bear due to the additional expense of EMI. It is a preferred system by both borrower and the lenders.
2. EMI: If you want to repay the loan as soon as possible, you can choose for a higher EMI. However, you need to have a high regular income as well to bear the strain of high EMI on your monthly financial budget. Thus, it is critical that you find the right balance between the amount of EMI and how much you can pay without putting too much strain on your financials. It is recommended that the EMI amount should not exceed 40 percent of your fixed monthly income.
3. Interest Rate: The rate of interest is also a significant factor in deciding the tenure of the loan. High-interest rate means higher payback amount and EMI. Longer tenure of the loan in itself attracts a higher loan amount than shorter tenure. This is because you are taking the amount for a longer period.
4. Age and Income: Your age is also an essential factor in deciding the loan tenure along with your income. If your age is below the early 40s, then long tenure will suit you while if you are close to retirement, then shorter tenure is the best option because your income will reduce after retirement. Even your income level is considered for loan tenure.
Lenders are always interested in assessing whether you can pay back the borrowed amount on time. That is why loan to older people are not readily available as in case of higher age, there is greater risk involved considering the uncertainty of future income.
Based on the factors mentioned above, you can easily decide the tenure of your loan against property. Making a decision just based on one or two factors is likely to put you in a stressful financial situation. Thus, make an assessment for each factor separately and then evaluate them together and find the right balance while deciding on the tenure for the loan against property.
Read:- Solve these Five Troubles by Loan Against Property