Personal loans are chic loans for hassle-free and immediate funds.
No collateral would come in the way of such dream holidays or spur-of-the-moment medical bills; they are fantastic for home repair work, too. But people never think about one very important fact when it comes to thinking about a personal loan: its length.
The choice of the period over which you want to return the money that you borrowed may affect your monthly EMIS, and thus ultimately the cost of your loan.
In this section, I have discussed in detail what the terms of a personal loan actually mean, what is the usual maximum and minimum periods that the lenders offer, and how you can understand which one will suit you.
Understanding Personal Loan Tenure
First, before coming to the figures, let’s explain what exactly personal loan tenure is. It is the timeframe in which you return a loan comprising both the principal loan amount and the interest over it, and it ranges from 6 months to 7 years depending upon the policies of the lending institution, creditworthiness of the customer, their income, and the amount of loan applied for.
Your choice of personal loan tenure directly influences the amount of monthly installment you need to pay, along with the total interest paid on the loan during the term. Understanding its implications is, therefore, one of the keys to sound financial planning.
What is the maximum duration for personal loan tenure?
The maximum tenures of a personal loan, which most banks or lending institutions give, are around 5 to 7 years. In terms of months, this is quite an appealing maximum number because it reduces your monthly EMIs and hence is relatively easier to manage in the short term.
Now suppose you borrow ₹5,00,000 on a yearly interest of 10%, and you keep the tenure for seven years. In that case, you will have to pay less amount of EMI every month owing to which the loan would sound more affordable. You will be paying more interest throughout the lifespan of that loan. Hence, it lowers immediate financial burdens but on the other hand it increases the overall cost of a personal loan.
This is ideal for those borrowers who either prefer relatively small EMIs or are in a good position to get long-term funding and therefore would want to spread their repayments.
What is the minimum period of Personal Loan Tenure?
It would be prudent to apply for a shorter period if one is quite sure of their capacity to return the money, and they want to pay it out as soon as possible. Most banks at least offer 6 to12 months on personal loans.
So, if you take ₹5,00,000 at 10% interest for one year, the EMIs are higher since they are paid off in instalments over a shorter time period, whereas the total interest paid out is a lot lesser. In the long term, short-term personal loans are much more economically viable. Ideal for those borrowers who can afford a decent income per month and avoid long-term liabilities. This is also good for those people who have to save on interest and keep a clean credit history by closing all loans ASAP.
Key Factors to Consider When Choosing Your Loan Tenure
There are a few key factors that just cannot be ignored while choosing the tenure of your personal loan. As a matter of fact, selecting a loan tenure actually is a practical projection of your financial situation and future goals. Hence, here is what you should consider while evaluating:
1. Income and Expenditure at the Time
The tenure also has to be chosen keeping in mind your capacity to bear the monthly EMI, yet being able to make your essential payments and savings. If the income is stable and sufficient, then the prospect of a shorter tenure is doable.
2. Interest Liability
Long-term personal loans mean low EMIs, but at the cost of higher interest outgo. In general, compare the interest payable on the total loan amount across different tenures and arrive at a tenure that lies comfortably within your budget and also aligns with your financial goals.
3. Future Monetary Plans
Are there going to be salary changes in the near future, or major expenses? You can work out a matching loan schedule for both. Opt for a shorter tenure if your income is going to increase; a longer tenure will ease cash flow in case of heavier expenses that could come along.
4. Amount of Loan Required
Generally speaking, the bigger the loan amount, the longer the period of its repayment would be, while smaller loans may be repaid in a much shorter time without much hassle.
5. Avail the EMI calculators
You can use an online EMI calculator to explore the options for tenure. It gives you an idea of what each option costs per month, hence helping you to decide.
Interest Rate v/s Tenure
The Balancing Act. The interest rate, personal loan tenure, and EMI itself-all are interconnected. Here’s how you go about this:
- Longer Tenure: Lower monthly EMIs; higher total interest. Suitable for you if you prefer longer tenure with stress-free repayments, but are willing to pay more.
- Shorter Tenure: Higher monthly EMIS, lower total interest. This will be good for a person whose income potentially covers the EMIS on loan amount and wants to minimise interest.
Remember, your credit score plays a role here; the better it is, the lower your interest rate will be, thereby reducing the impact of whatever tenure you choose.
Easy Financing at Your Fingertips
When it comes to quick, hassle-free funds, Stashfin stands out for its flexible personal loans. Be it for a short-term loan for immediate expenses or longer tenure for keeping repayments easy, Stashfin gives instant loans up to ₹5 Lakhs with least documentation and fast approvals.
Stashfin stands apart for its clutter-free interface, speedy approvals, and customized loan features to suit specific requirements. You can choose a tenure that fits your earnings and lifestyle and suits your plans at very competitive interest rates. No hidden charges, be it for the salaried professional or the self-employed.
The wide range of customers it caters to thus makes Stashfin your perfect financial partner in every situation.
