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Repayment Tenor: Why is it Important to Consider?

Talking about loan against property or any loan for that matter, not many know that the tenure of the loan plays an important role in the approval process. For instance, a longer repayment tenor means a smaller EMI but a higher interest payable - higher profits for the lender. However, this, from the second perspective means a higher risk for the lender: longer repayment tenor increases the chances of the borrower turning into an NPA (Non-Performing Asset). However, a lender would always try and even the experts suggest opting for a shorter tenor. The Loan Against Property Interest Rates are quite lower in comparison to other loan available.

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Why? A short repayment tenor is a win-win for both: (1) ensures faster recovery of the loan (2) less risk for the lender, (3) savings for the borrower, (4) lower interest rate and most importantly, (5) faster approval.

Summing up, choosing a shorter repayment tenor while applying for a loan against property can get you faster approval. However, there are a few things you need to take into consideration before opting for a short repayment tenor. To start with, how short should your tenor be? Check out how to find the answer.

  1. Assess your monthly budget: First of all, assess your monthly budget and see if there’s space for a new expense? This would be easy if you start with differentiating between the essential and nonessential needs.

  2. Gauge your repayment capacity: When you are done with monthly budget assessment, you’ll have an exact idea on how much can you save every month from your salary. Now, from the amount you are able to save, put aside a considerable percentage for investment and emergency purposes. In the end, what you are left with is your repayment capacity. Make sure your loan EMI isn’t even a single penny more than the derived repayment capacity.

  3. Use EMI calculator: Talking about the time, you know how much can you afford to pay the EMI. Therefore, you can use the loan against property EMI calculator or the EMI formula to find out the time/ tenor of the loan.