It is necessary to take care of these things before taking a home loan for a long period

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Ahmedabad. 24 June 2023 Saturday

It is not possible for everyone to buy a house in this time of inflation but nowadays the currency of taking home loan to fulfill this dream is constantly increasing. You buy a house by taking a home loan from the bank, but the repayment of the loan takes a very long time. Generally, the tenure offered by the bank is up to 30 years. But now loans up to 40 years are also available in the market. In which you get an opportunity to decide the tenure of the home loan according to your needs for a long period. Taking a home loan for a long term seems easy as the EMI of the loan is low. However, this is not so simple.

No immediate financial burden due to long duration

Loan tenure refers to the time under which you repay the entire home loan with equalized monthly installments as determined by the bank or financial institution. A housing loan is a large loan, where the loan amount is large. So it is difficult to repay the entire loan amount at once. Long repayment period of loan does not cause any immediate financial burden on people but long repayment period means that the person who has taken the loan has to repay it for a very long time. For example a 30-37 year old person can repay the loan till the age of 70-75 years for a 40 year loan available in the market. This looks good on papers but you have to think how they will pay the money after retirement as they continue to work even at that age, which may not be possible in all cases.

In this way you can reduce the home loan EMI

However, the advantage of extending the loan repayment period is that the EMI of the home loan decreases every month. This makes the loan cheaper as for the EMI amount in the loan one first checks whether it is cheaper or not based on his income. It is possible that a person needs a large loan amount, but if he stays on a tenure of 20 to 25 years, the EMI amount will be very high. So over a longer period will help reduce EMIs and make it cheaper, but the cheapness can be deceiving.

More interest has to be given on long period loan repayment

If you take a large amount of loan for a long period, it will also have a negative effect. That is interest. Due to this, the loan period will be longer and the interest payments will also be higher. There is also a gap in the loan interest rates in different banks. You should analyze the cost before taking the loan and factor it into the repayment plan. Apart from this, you can repay some of the loan amount from the available funds in the initial years of the loan, as this will reduce the interest.

Keep these things in mind while taking a home loan

While taking a home loan there should be a clear strategy regarding the loan amount and the mode of repayment. If the loan amount is large and the repayment period is long, the impact will also be large but special attention should be paid to how the loan repayment will be done. Meanwhile it would be better to repay some part of the loan in the initial years. This will reduce the amount you have to pay as interest. Many people decide to take a loan by looking at the EMI amount or the interest rate, which should also be taken into account. Because this is not a good way. If the interest rates are increasing then you have to factor in the cost and impact of the loan accordingly as most home loans are floating.

A person should have full opportunity to decide that there will be no pressure on his financial position if things do not work out on the issue of interest rate. Long term loans may look cheaper but they cost more.