Recorded since March 2011, there has been an average yearly rise of 7.1%* in real estate price in India till March 2019. Understandably, an increased number of individuals chose to acquire ownership of residential spaces. Consequently, they have gone for high amount loan schemes to meet their housing financial requirements. Facilitating the borrowers, these credit advances thus come with an extended tenor that range up to 20 years easing the repayment structure.
However, due to the availability of multiple such financing options, customers applying for a home loan must look into multiple factors prior to settling upon a financial product. Careful consideration of these factors ensures the borrower’s convenience while repaying his or her loan.
One such factor that needs to be taken into account is the loan tenor that plays a crucial role in determining the total cost of the loan. Additionally, while availing long-term advances like home loans, individuals can utilise the loan EMI calculator of the concerned HFC to settle upon a tenor that best suits their repayment capability.
Here are a listed few factors that need to be considered while deciding upon a loan tenor that ensures that you make the most of your availed loan.
- Age of Applicant
Age is a crucial home loan eligibility criteria as well as a vital deciding factor for the loan tenor. A younger applicant with more years in their employment career is more liable to bend towards longer loan tenors, considering that they will have a longer span of financial stability. It reflects their creditworthiness and hence makes them eligible to negotiate for longer tenors
- Repayment Capacity
The repayment capacity of a borrower is related to his or her income along with a few other factors. A crucial aspect to consider in this case is that of living expenses and other expenditures which cannot be avoided by an individual.
The applicant should plan out the financial layout before fixing on the loan tenor. Borrowers can easily use a home loan calculator to find the exact EMI amount they will have to repay every month.
Any borrower referring to an easy guide to increase their existing home loans can also use this EMI calculator to calculate the exact repayment amount and hence settle amount the tenor that best suits their current repayment capability.
- Financial Liabilities
Any potential borrower can have numerous existing financial liabilities. These come under FOIR or Fixed Obligation to Income Ratio and needs to be taken into consideration while adding another EMI to the monthly EMI total.
Financial institutions check these financial obligations to gauge the risk factor involved in lending to a specific individual. Conversely, borrowers should also check their financial liabilities and plan their tenor accordingly. Defaulting on any of the existing lines of credit can have a detrimental effect on the overall credit scenario of an individual.
- Interest Rate
There are several factors that impact a home loan interest rate. This rate of interest offered on these loan products are indirectly related to their tenor of repayment. Additionally, opting for a shorter tenor ensures that they pay a considerably low-interest amount and hence a reduced cost of the loan. Thus, approaching a lender that offers a competitive rate of interest is ideally essential.
- Prepayment Options
Having the option to prepay a loan is extremely crucial since this allows customers to cut down on their tenor along with their overall interest. Mostly, in the case of prepayment, borrowers do not have to pay the interest on several months of EMI. Consequently, the total expenditure on repayment of the interest amount goes down by manifolds.
Once a potential borrower has decided on the loan tenor and calculated the exact home loan EMI, the application procedure itself is convenient.
It is essential customers consider other crucial factors as well before choosing the financial institution for their home loan. Specific features offered by HFCs must be checked in detail as well. While right tenor ensures ease in repayment, right features promise maximum benefits from the financial product.
**Source: https://www.ceicdata.com/en/indicator/india/house-prices-growth
