Property and Construction News, Real Estate news Updates, Joint Ventures, Hot Property Updates, Home Loan News: SHORT TERM HOUSING LOAN TENURE MANAGEMENT

SHORT TERM HOUSING LOAN TENURE MANAGEMENT
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koncept Voice on 07/06/2009 07:05:00
 
Borrowers who seek to repay their debt faster opt for shorter tenures. A shorter
tenure translates into a larger outflow every month in the form of EMIs to the
lender. If you take a loan of Rs. 20-lakh at an interest rate of nine percent
and tenure of five years, your monthly EMI works out to be close to Rs 41,000.
Had the tenure been a longer 10 years, it may be lot lesser at Rs 25,000.
Setting apart a huge chunk of the monthly income towards servicing debt becomes
difficult at some point in time. Managing short-term loan repayments requires
prudent planning and discipline. Chosing short term tenure for repayment shows
the tendency of repaying the fast and to become debt free. If you pay in short
term you also come away from the fear of growth of the interest rates over a
long term. Increasing interest rates by bank in the 2008 end became a real
nightmare for the borrowers and created imbalances in their financial planning.
A Very short tenure loans are not advisable as they may cause unnecessarily
strain to financial planning. Setting aside a hefty sum month after month is not
an easy task either for the borrower.The tenure should be selected in taking
care of the monthly repayment capacity of EMI to the borrower. You should have
money left to save and set aside towards emergency funds. People with higher
disposable income and expecting increased income levels can select a short
tenure loan. Borrowers must keep in mind that their EMI outflow doesn’t remain
constant, especially in case of floating rates. In case of short tenure loans, a
small increase in the interest ate translates into a larger increase in the EMI.
It is advisable to go for fixed rate of interest for loan so that there is no
unexpected increases in rates and consequently burden of repayment.
Refrain from incurring new debt. Acquiring new debts in these times of job cuts
and economic slowdown could lead you into a debt trap.Since the tenure of the
loan is short, it is imperative to make alternate arrangements for financial
commitments that may crop up in the immediate future.
One needn’t be bothered about longterm financial obligations however. Do not
forget to save regularly and plan for retirement. One must set aside funds for
healthcare and many other financial obligations that may crop up suddenly.
Borrow as little as possible and prepay whenever you have excess funds. For
those who find repaying tedious, explore the option of increasing the loan
tenure with the lender. It is observed that most borrowers repay their home loan
within eight years. Since people hate to default on home loans, they repay it
whenever they receive an unexpected windfall from some other investment. Short
tenure loan borrowers can become debtfree quickly by curtailing their spending
and managing their finances efficiently.