If banks secretly increase home loan tenure, how to reduce it? What is the disadvantage of long-term loans? Understand here
Many times when the interest rates of home loans increase, banks automatically increase your tenure. The advantage of this is that you do not have to bear the load of increased EMI. The EMI that is already running, remains the same. But is a long-term loan the right decision? Understand here.
Home Loan: Nowadays people take home loans to buy a house. Most people take a large amount from the bank as a home loan and repay it through EMI. How much EMI will be made on the loan amount depends on that amount and the tenure of the loan. The longer the loan tenure, the smaller the EMI becomes. To keep the EMI small, many people get their tenure extended.
At the same time, many times when the interest rates of home loans increase, banks automatically increase your tenure. The advantage of this is that you do not have to bear the load of increased EMI. The EMI that is already running continues to be the same. But the responsibility of repaying the loan gets stretched for a longer period. What should be done in such a situation? In the case of a home loan, should the loan tenure be increased or should the EMI be increased? Which decision will prove right for you? Know here-
Understand what is the disadvantage of having a long loan tenure
Taking a long term home loan reduces your EMI, but you have to pay a lot of interest in return. Understand it with an example-
Suppose you take a home loan of Rs 30 lakh from SBI for 15 years and 9.55% interest is charged on it, then your monthly EMI will be Rs 31417. You will have to pay Rs 26,55,117 on the loan amount as interest only, in this way you will pay a total of Rs 56,55,117 by combining interest and principal amount.
If you take a loan of Rs 30 lakh for 30 years, then the EMI will be reduced to Rs 25,335. But at the rate of 9.55 percent interest, you will have to pay Rs 61,20,651 as interest in 30 years. If the principal amount is also included in this, then you will pay a total of Rs 91,20,651 in 30 years, which will be three times the amount of your loan.
How to reduce the long tenure
You must have understood how big a loss is due to the long loan tenure. So if you have taken a loan for a long tenure or the bank has increased your tenure, then in this situation you can reduce your tenure. One way to do this is to increase your EMI. But for this you will have to check your pocket first. That means you will have to see whether you will be able to bear the burden of the increased EMI? If you can do this, then increase the EMI and reduce the loan tenure.
The second method is prepayment. If you cannot bear the burden of a large EMI, then pay a lump sum amount in between the loan. This will reduce your principal amount. When your principal amount becomes so low that you can easily bear the load of its EMI even with a shorter tenure, then you can increase your EMI and reduce the loan tenure by getting the loan restructured from the bank.
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