Short Term vs Long Term Home Loan: Advantages and Things to Consider
20 December, 2024
Synopsis
A Home Loan tenure is the period during which the borrower pays back the loan amount to the lender along with the interest.
This pre-decided period determines the number of your EMIs that must be paid as well as the time you will have to repay the loan.
Short-term home loans have quick processing and lower interest but higher EMIs, while long-term loans offer lower EMIs but higher total interest.
Financing your future home can be a big step in your life. Whether you are working or self-employed, the costs of acquiring or constructing a residential property may take a toll on your finances. If you are considering taking a Home Loan, it is important to consider the various aspects involved in the loan process.
A Home Loan tenure should generally reflect your financial capacity and discipline to make the payments on time. In this blog, we will understand the difference between the Long-Term and Short-Term Home Loan options and see which one suits your needs the best.
What is a Short-Term Home Loan?
A Short-Term Home Loan is usually given for a period of up to 5 years as itinsure easy and quick disbursal of the loan amount. A Short-Term Loan can be processed quickly depending on the lender. It requires repayment over a shorter period with higher EMIs and potentially lower total interest charges. Borrowers might select a short tenure to address urgent financial needs.
Advantages of Short -Term Loans
The following are the various benefits of Short-Term Loans:
Quick Processing: Short-term loans may be processed comparatively quickly for immediate investment requirements.
Optional Collateral: Lenders may not require your assets as collateral for a short-term financing. A lender may rely on your creditworthiness and repayment history to grant a Short-Term Loan.
Lower Interest Charges: Due to the short duration of loan tenure, you may end up paying lesser interest costs.
Faster Repayment: If you have the financial capacity to pay higher EMIs, a short-tenure loan can increase equity much faster and result in significant savings.
Things to Consider
When it comes to Short-Term Loans, here are a few things you may want to keep in mind:
Higher EMIs: With a shorter loan tenure, the amount charged monthly as EMIs increases. Higher amount of EMIs can impact other financial commitments.
Higher Eligibility: Since the amount to be paid monthly is higher, the lender may keep stringent eligibility criteria of qualification. Your income should be sufficient to pay the EMIs on a timely basis.
What is a Long-Term Home Loan?
A Long-Term Home Loan has a loan tenure of more than 5 years which can extend up to 30 years as per the norms of the lender. This longer tenure offers lenient EMIs and a longer term for repayment. With a Long-Term Loan, you can also expect lower home loan interest rates and lower EMIs due to an extended repayment period.
It is important to consider your goals, financial situation, repayment capacity, etc before picking the right loan tenure. It is usually advised to seek professional advice for selecting the right financing option for your future home.
Advantages of Long -Term Home Loans
The benefits of Long Term Home Loans are outlined below:
Pocket-Friendly EMIs: If you are looking for a home financing option on a restrictive budget, a long-term loan may offer you lower amounts of monthly payments.
Longer Repayment Period: With a longer loan tenure, you can easily repay the loan amount over a comfortable duration. A longer time frame of repayment can provide greater space for accommodating other financial requirements.
Things to Consider
Consider the following factors when choosing a Long Term tenure:
Higher Interest Costs: You may end up paying high interest rates against longer loan tenures.
Slower Equity Build-Up: As you pay lower EMIs, the principal loan amount takes longer to be repaid.
Ready to take things forward with exciting features?
HDFC Bank Home Loans offer expert guidance to help you with all your confusions. We prioritise the needs of our customers and offer tailored Home Loan options that best satisfy their needs. We offer competitive interest rates, customised loan tenures, easy processing journey and much more. Apply for a Home Loan with HDFC Bank.
*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
