Loan tenure is the term of a loan. It is the period for which a lender lends money or is the maximum period by which the whole of the principal amount and the applicable interest amount has to liquidated by the borrower.
Factors for Loan Tenure
The loan tenure is calculated taking into account factors like :
Life of the asset which is going to be created by availing the loan
In practice we consider the life of a car to be 7 years or after 7 years the resale value of a car would be negligible and most of the lenders has ceiled the loan tenure of car loans to be maximum 7 years. This is because car loan is a secured loan and the value of the security will erode with time. If there is a default, the lender will be able to recover very little if it is sold after 7 years.
Age of the borrower
The age of the borrower is taken into account to access his income generating ability. If in the above case, the borrower is of 56 years of age and he will be retiring after 4 years. The financier will lend him for 4 years only and not 7 years.
A self explainatory article made all the more simple by examples. Loan tenure is the time period for which the loan is sanctioned. It varies according to the situation. But who decides the tenure? The borrower or the lender or is it mutual or predecided. If predecided does it changes for different situation or constant?
Very easy to understand term with nicely explained article. Any layman will also understand the term Loan Tenure after reading this article. I will add one more factor in this i.e. when anyone takes home loan the tenure is not more than 25 yrs. which is granted as employment period.
It is a very nice article very well explained. It is in such simple terms that anyone would understand. Even though the term loan tenure is itself self-explanatory the explanation is itself very clear. The tenure differs for each type of loan and at the time of loan. A very good article in the recent times.