Long Term Loan or Short Term Loan: Which One to Opt For?
Apr 12, 2017 Home Trading Steps
Buying a house is a dream come true, and a huge decision. But often buyers get confused regarding whether to opt for long term loans or short term loans to buy the house.
We discuss it in detail here.
1.Monthly income:
Your monthly income determines the ability to pay the EMI, and therefore plays an important role in determining whether to opt for short term loans or long term loans. If you have a good income, then it is better to opt for short term loans. Even though the monthly EMI will be little higher, the total interest that you will pay at the end will be less.
2.Age matters:
There are some places where age isn’t just numbers. Taking a loan is one such place. If you are in your early 20s or 30s, you can opt for long term loans. But if you are in your late 40s or early 50s, then it is better to take a short term loan. Banks only provide loan till the retirement age.
3.Interest rate:
Before opting for the short term or long term loans, it is important to decide whether you are opting for floating interest rates or fixed interest rates. Floating interest rates keep changing with time and market trends whereas fixed interest are same throughout the end of the loan.
It is essential to consider and carefully think about all these factors before opting for a loan. It is also important to check the pre-payment charges. If your lender is running some promotion or offer that makes free cash available to you, pay your EMI with them rather than spending them elsewhere. But if you choose to go with this, do this in the initial stage of the loan payment.
Loans are generally designed in a way that the entire loan is paid in the initial stages, paying them in later stages does not make any sense.
It is also important to consider your financial position before opting for the loan. It is generally better to take short term loan and get over the burden of paying EMIs soon, but if you have a financial restriction than taking a long term loan is the only option. It should totally depend on the buyer to take a short term or long term loan. Taking the risk factor involved with both short and long term loans are important as well.
We discuss it in detail here.
1.Monthly income:
Your monthly income determines the ability to pay the EMI, and therefore plays an important role in determining whether to opt for short term loans or long term loans. If you have a good income, then it is better to opt for short term loans. Even though the monthly EMI will be little higher, the total interest that you will pay at the end will be less.
2.Age matters:
There are some places where age isn’t just numbers. Taking a loan is one such place. If you are in your early 20s or 30s, you can opt for long term loans. But if you are in your late 40s or early 50s, then it is better to take a short term loan. Banks only provide loan till the retirement age.
3.Interest rate:
Before opting for the short term or long term loans, it is important to decide whether you are opting for floating interest rates or fixed interest rates. Floating interest rates keep changing with time and market trends whereas fixed interest are same throughout the end of the loan.
It is essential to consider and carefully think about all these factors before opting for a loan. It is also important to check the pre-payment charges. If your lender is running some promotion or offer that makes free cash available to you, pay your EMI with them rather than spending them elsewhere. But if you choose to go with this, do this in the initial stage of the loan payment.
Loans are generally designed in a way that the entire loan is paid in the initial stages, paying them in later stages does not make any sense.
It is also important to consider your financial position before opting for the loan. It is generally better to take short term loan and get over the burden of paying EMIs soon, but if you have a financial restriction than taking a long term loan is the only option. It should totally depend on the buyer to take a short term or long term loan. Taking the risk factor involved with both short and long term loans are important as well.
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