What should be the right age for taking up a Loan?

One of the biggest worry that everyone faces today is- why should we take loans and what is the right age to take it up?
In recent times, as the rate of inflation has touched double digit figure choosing the right loan tenure becomes even more important as interest rates shows signs of going up further. There are certain factors to keep in mind before taking up any loan- be it a home loan, education loan or even a mini cash loan.

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Is Age on your side?

The first and a very important factor is the age. The younger the age, higher is the tenure available to a loan borrower. This means, if one decides to take a loan in their 30’s, they can get a loan for 20 years—the maximum loan tenure offered by most Indian Banks currently. Some banks offer loan for about 25 years but that is an exception than a rule. According to the eligibility criteria of the banks, age of retirement is 60 years in case of salaried and 65 years in case of self-employed individuals.

Why Age is important?

If the loan borrower is younger, he/she can get an extension in his/her tenure. Remember that some banks offer maximum loan tenure of 25 years. If the loan borrower is in his 40’s, the only option available in such a case would be to increase the EMI. And this can cause a lot of pain especially in times when the inflation is soaring.

But this is easier said than done. The reason is, by the time you are in your 40’s, the rate of increase in potential income is much lesser as compared to what one can expect at a younger age, say in early 20’s or 30’s.

Another benefit of younger age is the increased loan eligibility. Even though the current income is taken into account while giving a loan, the potential of increase in salary is also taken into consideration. So, one can easily opt for a top-up loan to meet personal needs or take care of an increased EMI if at all a borrower faces such a situation.

There are repayment options such as step-up repayment facility where the EMI is low in the initial period and increases at a later stage. This actually coincides with an increase in salary of a salaried borrower. This could be ideal for young borrowers who are climbing rungs professionally. But this is an option available for the younger lot.

Our Quick Tip

While there may be more beneficial factors of taking up a loan at a younger age, we feel that there is no right or a wrong age for applying for a loan. The decision lies on your equity and mental and financial appetite for debt. Every individual takes his or her own time to settle with the idea of buying a house or to take up any big loan. So take your time, make up your mind for taking up any loan, understand the pros and cons of it and only then go forward with it.