How to Determine the Ideal Loan Repayment Period of Your LAP

Often, when you need to take care of a large expense without delay, maxing out your credit card or taking a personal loan might not be enough or wise. A loan against property or LAP can come in handy instead. It is one of the best ways to fund the expansion of your business, a lavish wedding, your dream vacation, the treatment of a serious medical condition or any other need. Since it is secured in nature, the interest rate on loan against property is usually affordable, the chance of approval is high, and the loan tenure can be flexible and long. However, you need to decide on the right tenure before you submit your application as this can determine your total loan burden and the EMIs. How to do that? Here are the factors to keep in mind.

Age of the applicant
Your age determines the loan repayment period to a large extent for a simple reason. If you are young or have just started earning, you can take a large amount of loan and opt for a long tenure, since you have ample time and scope to pay it back. Just make sure you keep all income proofs handy. But if you are about to retire, a short tenure is better, as you might not have a steady source of income for long.

            ALSO READ: Beginner’s Guide For Taking A Loan Against Property

Interest rate and EMI
You might be already aware that the interest rate on loan against property and the tenure are related. For instance, the longer the tenure, the lower will be the interest rate and the EMIs. And in case of shorter tenures, the interest rate and EMIs will be high. So, it depends on your budget and repayment ability when it comes to choosing the right tenure. However, remember that a longer tenure will ultimately lead to a larger interest cost in the long run. Hence, if possible, you should try and go for a short tenure.

 

The amount of loan
Usually, if your loan amount is a large one, it makes sense to choose a long tenure, so that your EMIs are easier to handle. This will also exert less stress on your monthly budget. Then again, as stated above, a long tenure makes the total interest cost high. So, a good idea is to use a loan repayment calculator and try out various loan amounts, interest rates and tenures to arrive at the EMI that is comfortable for you. Maybe you can try and make a substantial down-payment, so that you can reduce the amount of loan you are availing, thereby reducing the tenure.

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Other existing loans
Though a loan against property is approved and disbursed based on the value of the collateral you pledge, financial institutions check many other parameters to gauge your credit-worthiness or credibility as a borrower. One of these involves any existing loans that you might have. If you have a few or zero financial liability or obligation, you might be eligible for a large loan amount and a long tenure. This is because the lender will consider you low-risk and someone who will not struggle to pay the EMIs. In case you have too many existing loans that you are still repaying, lenders might not want to approve a large amount.

The value of the property
When financial institutions assess the value of the property you are pledging, they do it based on its location, age, condition, size and many other parameters. And the higher the market value, the larger the loan amount that you are likely to get. This can help you get a long tenure too. However, keep in mind the kind of EMI you can pay on a monthly basis and then decide on the tenure, so as to minimize the total interest cost as discussed above. Make sure you have all property related documents in place to negotiate good terms with the lender.

To wrap up, the loan repayment period in case of LAP can be well-determined once you keep the above factors in mind. Always compare lenders, research about the loan terms they are offering and assess your needs correctly before taking a call. And remember that while a long tenure will make monthly repayments more affordable, a shorter tenure will reduce your total interest cost in the long run.