How To Choose A Suitable Personal Loan Tenure?

Posted by Shashank Bhaskar on February 15th, 2022

There comes a time when getting immediate financial assistance becomes a priority. You have exhausted your funds or have limited savings to utilise. In such instances, banks lend a helping hand in the Personal Loan. They sanction it without any restrictions for use. Moreover, the procedure, documentation, verification, and disbursal get done without any hassles. Considering the convenience, most people favour this Loan type for emergencies.

If you intend to apply for Personal Loans, consider the crucial factors. This includes the interest rate, equated monthly instalments, and tenure. They have a significant impact on your income and lifestyle. Hence, understand them before finalising the terms. It is because you get to customise them based on your convenience. This article talks about adjusting the tenure for a smooth repayment experience. Here are some ways to do it:

Consider existing liabilities

Taking the Loan is financial responsibility. Even if it helps bridge your current financial gap, you need to repay it later. Hence, you need to check your financial standing and Personal Loan eligibility for the same. This involves evaluating your current monetary commitments. They might include other Loans, credit card payments, rent, fees, or family obligations. You must choose the tenure which balances all the liabilities without any hassle.

Account future financial conditions

Besides the current situation, you also need to consider prospects for effective planning. For this, think from a long-term perspective. Banks sanction the Loan for up to five years. Check if there are chances of promotions or additional income accumulating during this period. If so, plan the Loan duration accordingly. An EMI calculator is a helpful tool that helps in arranging this.

Check prepayment terms

Banks spread out the repayment in flexible EMIs for your convenience. But it is not mandatory to stick to the fixed repayment terms. You may opt to repay the Loam amount faster in extra income. However, this attracts a prepayment penalty. It is usually up to 1% to 2% of the outstanding principal amount. Check how this affects the Personal Loan interest rates and other aspects and adjust the tenure accordingly.

Remember the loan amount

The amount you borrow largely influences the Loan terms. For a smaller amount, it is ideal to have a shorter tenure to repay it quickly. This allows you to adjust your finances for a few months and reduce the interest payout. But in the case of a considerable amount, you cannot avoid a longer tenure. But ensure to stretch it reasonably to reduce the overall interest outgo. Avoid getting lured by lower EMIs as they cost heftily in the long run.

Applying these strategies enables you to have a planned approach to repayment. It also allows you to create a feasible monthly budget using the Banking app.