Want to opt for a personal loan?
It’s very easy.
But wait, have you done your research?
This word is very important for every customer planning to take any kind of a loan. Applying for a personal loan is possible with just one click. But the planning that goes into making this decision must be done in a diligent manner. Just wanting a loan to satisfy the need is not enough. You must be clear about the loan amount, EMI and the interest rate. One of such factors which is important is the tenure of the loan.
What is loan tenure?
Loan tenure is a pre agreed period between the customer and the Bank. This agreement states that you shall repay the said loan principal amount along with the interest amount. Bank can offer various flexible options to the customers on the basis of their income and whatever suits their current condition. Choosing the right tenure is very important as any miscalculation and you might have a tough time repaying the loan EMI on time without defaulting.
In order to ensure this does not happen, we have made a set of 3 factors that you need to check so you can choose the tenure for personal loans.
Loan Interest Rate and Credit Score:
You need to carefully decide the tenure based on your interest rate and the loan EMI. In case you get a smaller tenure, there is a higher chance that the interest rate would be high. Hence, it might be burdensome on you to repay the loan amount. However if you have a longer tenure, you might get a lower interest rate. The only downside here is that longer the tenure, higher would be the interest amount you will have to repay.
Having a good credit score helps as you will be able to renegotiate good terms and lower the interest rates. This can help you save a lot of money.
Your Monthly Budget:
Apart from the loan interest rate, you need to be clear with the monthly budget. As a major chunk of your budget would go in repaying the loan EMI. In case you opt for a shorter tenure, the EMI will be high and it will directly affect your budget. In case the tenure is long, the EMI will be low and it will ease your budget. Hence decide as per your expectations and expenses.
Reading terms and conditions:
The last aspect you need to focus on is reading the terms and conditions. Please read the loan application in order to understand the fine print. Prepayment terms must be studied well in advance. In case the bank charges a pre payment facility, you can calculate the impact it will have on your budget. You can use the EMI calculators to analyze how much EMI is ideal for you to repay.
Overall, these three factors can help you in making the important decision of choosing the personal loan tenure.