22 MARCH, 2022

A loan against property is a secured loan that you can avail from banks and financial institutions. The funds from a loan against property can be used for any purpose you like, be it debt consolidation, wedding, travel, medical treatment, home renovation, higher education, business expansion, etc. You can mortgage your industrial, commercial or residential property to get a loan and repay it in easy Equated Monthly Installments (EMI). Naturally, it is a convenient means to arrange funds.


However, a loan against property involves a substantial amount of money, where your property is at stake. Therefore, you must opt for an ideal tenure that helps you pay the loan comfortably. You might wonder how to choose an ideal tenure for you. We can help. 


Continue reading to know the aspects you should consider while choosing the tenure for you.


  • Age

Consider your age while you choose your tenure. If you are young, in your 20s and 30s, you can opt for a longer tenure as you are in your earning age and can pay off the loan comfortably. You can always prepay the loan later when you can afford it. However, if you are nearing retirement, it makes more sense to pay off the loan faster while you are still earning and opt for a shorter tenure. 


  • Loan amount

Your loan amount is a crucial determinant for your loan against property tenure. If you take a significantly higher loan amount, it is better to go for a longer tenure. A longer tenure helps you repay the loan comfortably in small EMIs. Moreover, usually, lenders do not approve a loan with short tenure if the loan amount is high. Having a very short tenure increases the risk of default for them.


  • EMI

Your affordability can also help you determine the tenure. If you cannot pay a higher amount, you can opt for a longer tenure and get a convenient EMI for you. Similarly, if you can afford a higher EMI, you can opt for a shorter tenure. While deciding, you must know that the longer tenure will increase your interest outgo and thus the cost of borrowing. Often lenders charge a lower interest rate on longer tenure as the borrowers have more time to repay, reducing the risk of default. Therefore, you must consider your financial viability while determining your tenure based on EMI and interest rates.


Your loan against property tenure should help you comfortably pay the EMIs. Apart from the above-mentioned factors, you must also consider your present financial obligations, income level and other expenses while deciding the tenure. If you have any substantial upcoming expenses that you need to pay for, you can opt for a longer tenure. Similarly, if you have other EMIs to pay, a longer tenure would help you repay all the debts comfortably without stressing your budget. You can always use a loan against property EMI calculator, which will help you make informed decisions.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.