When you apply for a loan against property, there are three important things you have to consider – the loan amount, the interest rate, and the loan tenure. All three factors are interlinked and determine your Equated Monthly Installments (EMIs), cost of borrowing, and the terms of your loan. For some individuals, a longer loan tenure works better while for others, a shorter loan tenure is more strategic. To figure out what works best for you, consider the following factors: 

• Loan amount

The amount of loan you opt for when you apply for a loan against property is one of the primary factors that impact your loan tenure. Typically, the higher the amount of the loan, the longer is the tenure. This is because the EMI burden gets spread over a longer period and makes it easier for you to fit this obligation into your budget. Conversely, loans with lower amounts tend to have shorter tenures. 

• Age

Another determinant of what your loan against property tenure should be is your age. The younger you are, the longer your loan tenure can be, if needed. This is because you have a long period of income-earning years ahead of you and also probable income increases. However, if you are closer to retirement, you should consider a shorter tenure because ideally, you want to pay off all debt before you retire.

• Income consistency

When deciding your loan against property tenure, it is also important to consider how consistent your income is. If you are self-employed and run your own business or are a freelancer, then you may want to consider a longer loan tenure. This will translate into a lower EMI obligation, which may make it easier for you to meet your EMI payments as per the deadline. 

• Interest outgo 

The cost of your loan against property or your interest outgo depends upon your loan tenure. The longer your loan tenure, the more will be your interest tenure. You can see this relationship between the overall payable interest and the loan tenure by using a loan against property EMI calculator. For example, if you take a loan of Rs 20 lakh at a loan against property interest rate of 10%, your interest payable for a tenure of five years would be around Rs 5.49 lakh. However, if you increase the tenure even by four years, your interest payable would almost double at Rs 10.40 lakh. 

Final words

If your loan amount is lower and your income is consistent, a shorter loan tenure would be ideal. This would help your interest outgo be minimal and you wouldn’t struggle meeting your EMIs either. However, if your loan amount is higher or your income is inconsistent, or you have several income-earning years ahead of you, you can consider a longer loan tenure so that meeting your EMI obligations is not an issue. Make sure to consider all these factors before you apply for a loan against property. Using a loan against property EMI calculator will be beneficial in this process.