A Home Loan is a form of financial aid extended by banks to help you purchase or construct your house. While selecting a Home Loan, you need to consider various aspects such as the amount offered, the interest rate levied, the repayment options, etc. One such factor that is vital to your selection process is the Home Loan Tenure.
What is Home Loan Tenure?
When you apply for a Home Loan, you want to avail of funds that you will repay, along with interest, over a duration. This pre-decided period is called the tenure of the loan. It is the period for which you can borrow funds from the banks and the time frame you must repay it. The tenure of your Home Loan impacts the interest rate levied and the number of EMIs you have to pay. Thus, you must reflect upon the tenure before applying for a Home Loan.
Short-Term vs Long-Term Tenure: Which one is better?
The table below will illustrate the points of difference between the two kinds of House Loan tenures.
Topic | Long-Term Tenure | Short-Term Tenure |
Time Period | A long-term Home Loan offers you more than 5 years. The Home Loan maximum tenure can extend up to 30 years, as well. | Any loan offered to you for 5 years or less has a short-term tenure. |
Interest Rates | Long-term tenures provide you with a longer time to repay the loan; hence, interest rates are usually lower. | To compensate for the smaller loan period, banks charge you with comparatively higher rates of interest. |
EMI Amount | Since EMI payments are spread over a more extensive timeframe, you have to pay the EMI amount is lower. However, the interest charged over this timeframe is higher. | The short-term causes the EMI amounts to have to pay to be on the higher side. However, you save money on the total interest amount due on loan. |
Loan Amount and Disbursal Speed | Since the tenure of the loan is longer, the amount is also high. Hence, the bank checks your credit history and other aspects before approving your loan amount. This invariably lengthens the disbursal process. | The short extension of loan payment only allows for the disbursal of small amounts. Due to this, the loan can be disbursed to you relatively quickly. |
How to select the ideal Home Loan Tenure for you?
When it comes to choosing between short-term or long-term Home Loan tenure, there is no concrete answer. The tenure you choose must depend on your needs and your ability to repay the loan amount. Consider your housing requirements, costs, and personal finances while deciding on the Home Loan Tenure. If you are confused, you can seek professional help and understand the nuances of choosing a specific tenure.
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Did you know your Home Loan Amortization Schedule can help you plan your loan better? Click here to read more about it!
*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. Home Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.
