How should you decide the tenure for the repayment of your home loan?

by Finway FSC Empowering People Financially

Life in rented apartments is a hectic and uncertain one. Even if the place itself is nice, there is this constant nagging feeling that keeps telling you that you’ll have to leave it one day and move to another place. That’s why it’s hard to get a feeling of belongingness in a rented accommodation. Having one’s own home is everyone’s dream. As soon as we step into adulthood and get a job, we start planning for our dream home. But it isn’t so easy always. Oftentimes, a lifetime of savings isn’t enough to buy a house – especially given the fact that the cost of real estate is increasing at a breakneck speed with every passing day.

The only way, therefore, is to go for a loan. The trouble with banks is that they disburse loans after conducting plenty of background checks, studying credit history and income tax dues etc. But nowadays, an alternative solution has mushroomed up in the form NBFCs (Non-Banking Financial Companies). These companies offer low interest home loans as compared to the traditional banks and their disbursement procedure is quicker, more efficient and user friendly as well.

Among the plethora of such options people often feel baffled with choices. But when it comes to deciding the terms and conditions of the loan, something that people find very confusing is the tenure of the home loan. People are always worried whether they should consider a shorter tenure or a longer tenure for the loan. Would 10 years be enough to pay off a home loan in Delhi or should you go for 20 years? Naturally, the longer your tenure of repayment the more amount of money you’ll have to return to the bank in terms of interest.

Things however, are seldom as simple as they seem. The problem with opting for shorter tenure is that it isn’t safe because the monthly installments that you’re paying to the bank are quite high. A shorter tenure may work now, given your present financial conditions, but if you haven’t taken unprecedented factors into account then you may end up getting yourself into a boatload of trouble in the future. Imagine if some unfortunate incident occurs in the future and you end up losing a chunk of your income. Then you would be faced with paying those high installments while in a financial crunch. If you don’t, you may even end up losing your house – simply because you took a shorter tenure for a home loan in Delhi.

Therefore, it’s wise to go for a longer tenure. Since you’re required to pay small installments every month, you aren’t under pressure and you can manage even to pay them, even in case of a financial crisis in the possible future. The maximum tenure limit that banks and NBFCs offer on loans is 30 years.

Experts suggest that people should always take their financial conditions in account before deciding the tenure of a home loan. Even if you have the necessary money to pay back the high monthly installments easily, you should still go for a longer tenure. The amount you save monthly can become your investment. You can either invest that money in stock market or go for safer options, like a safe deposit. The inherent response to quickly getting rid of the loan doesn’t translate into a wise financial decision – and it’s something you should refrain from. Plan an easy way of repaying the loan, save the excess money and invest it elsewhere. This way, you’ll be able to generate wealth for yourself which can even assist you in the repayment of loan in the future.