Question 1

What is the ideal loan tenure?

Accepted Answer

The ideal tenure depends on your age and financial goals. Younger borrowers (under 35) can opt for 20-25 years to keep EMI low while investing surplus. Those 40+ should choose 10-15 years to become debt-free before retirement. Balance EMI affordability (within 40% of income) with total interest cost.

Question 2

How does tenure affect total interest paid?

Accepted Answer

Longer tenure significantly increases total interest. On a Rs. 50 lakh loan at 8.5%, a 20-year tenure costs Rs. 54 lakhs in interest while a 10-year tenure costs Rs. 27 lakhs - a 100% difference. However, the 10-year EMI is Rs. 75,000 vs Rs. 43,000 for 20 years. Choose based on your affordability.

Question 3

Can I change my loan tenure after taking the loan?

Accepted Answer

Yes, you can change tenure through loan restructuring, though lenders may charge a small fee. You can reduce tenure by increasing EMI or extend it by reducing EMI (subject to age limits). Making prepayments also effectively reduces tenure without formal restructuring.

Question 4

Should I choose longer tenure and invest the EMI difference?

Accepted Answer

This strategy works if your investments consistently earn 2-3% more than your loan rate. For example, if your loan is at 8.5% and you can reliably earn 12-15% in equity, taking longer tenure and investing the difference makes sense. However, guaranteed interest savings from shorter tenure is often the safer bet.

Question 5

What is the maximum loan tenure allowed in India?

Accepted Answer

Home loans: up to 30 years; Car loans: 5-7 years; Personal loans: 5-7 years; Education loans: 10-15 years; Gold loans: 1-5 years. The maximum tenure also depends on your age - most banks require the loan to end before you turn 65-70. Your actual maximum tenure may be lower based on age constraints.

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