One of the important considerations while applying for a personal loan is the amount of time that you would require to repay it. The repayment tenure could influence not only the amount of EMI you have to repay each month but also the interest that you end up paying.
The repayment tenure of a personal loan could vary anywhere between a few months and several years depending upon the conditions offered by the particular lender. While opting for the maximum loan tenure may appear to be an easy choice since it provides additional time to repay the loan, the cost of borrowing could rise significantly.
In this blog, we will discuss the concept of maximum loan tenure, the importance of selecting the right tenure, factors to be considered, and finally ways to choose the right tenure.
What is the personal loan maximum tenure?
Personal loan maximum tenure is the longest period a lender allows you to repay your loan. This simply means if the lender offers a repayment tenure starting from 6 months and ending at 60 months, then the maximum tenure in this case is 60 months. During this time, you will have to pay equal monthly amounts, known as EMIs, until your debt is fully cleared.
How does the tenure actually work?
A portion of your monthly payment is allocated to the principal amount of the loan, while another portion of your payment is allocated to the interest. The longer the timeline, the longer the payment schedule will be, thereby reducing the monthly payments. It may look attractive initially, but in reality, the longer it takes, the more interest you have to pay.
Why is it important to choose the right loan tenure?
The right loan repayment tenure can make your borrowing journey easy and manageable, whereas the wrong one can make it very challenging for you. Here’s why you must choose the right repayment tenure:
It helps you manage monthly expenses: Paying rent, electricity, and other bills, and buying groceries are part of life. This shows that your salary is already split into many categories. In addition to this, if your EMI is high, you may not be left with much in case of any unforeseen expenses. By picking the right personal loan maximum tenure, you will be able to manage your EMI and fulfil your monetary requirements.- It can reduce your overall borrowing cost: A shorter loan period implies a lower total interest amount over the course of the loan, given that the interest rate, personal loan processing fees, and all other conditions remain unchanged. However, the EMI payment should still be manageable. It is not wise to choose a short loan term solely to cut interest costs if it strains your monthly finances.
- It gives you a clearer repayment plan: If you know when your loan tenure is going to end, then you can plan how you are going to spend your money in the future. This could be anything from arranging for a family function to going in for an education or home improvement. Before taking an instant loan, consider whether the EMI will leave enough money for these goals.
What should you consider before choosing a loan tenure?
There is no standard repayment term that will be perfect for all borrowers. In determining the maximum personal loan repayment term, you need to consider your financial situation and the lending institution’s terms and conditions. Let’s delve into this:
- Your monthly income and expenses: First, find out the net salary after subtracting your expenses such as current EMIs and savings. This will help you calculate the loan amount you can actually afford. For instance, a person who earns ₹50,000 per month and has several EMIs already may not have as much flexibility to pay an additional EMI as a person earning the same but without any other loans.
- The interest rate and total repayment amount: Comparing personal loan requirements just on the basis of their monthly EMI is not advisable. You should also consider other aspects such as the interest rate, total interest payment, and total repayment amount. A low EMI might seem to be more beneficial, but a high tenure could result in you paying more for the loan.
- Processing fees and other charges: Personal loan processing fees may influence your loan amount and the overall cost of borrowing. The amount of the processing fee, along with the GST that might apply, is usually subtracted from the sanctioned amount depending on the lender. This is why you must check the processing fee, other charges, if any, and the Annual Percentage Rate (APR), which shows the cost of financing per year, before accepting the loan offer.
- Your eligibility and loan terms: The lender analyses your income, your credit score, your existing debts, and many other details before determining whether you are eligible for the offer or not. Check the personal loan requirements so you know how much money is available to you before you apply.
How can you choose the right maximum loan tenure?
Now here comes the most awaited question of the blog. This is how you can choose the right maximum loan tenure:
Step 1
Calculate a comfortable EMI
Make a list of all your monthly income, essential expenses, existing EMIs, and savings, so you have a clear idea of where exactly your money is going. Then, decide how much you can set aside for an additional new repayment without stretching your budget.
Step 2
Compare different tenures
Comparison is extremely important here. Use a loan EMI calculator to compare repayment periods. You just simply have to enter the loan amount, interest rate and tenure to estimate your monthly EMI along with the total interest you have to repay. Instead of selecting the longest period right away, check different options. This can help you see how much you save each month and what the additional interest may cost.
Step 3
Review all loan terms
Before completing an online loan application, check the interest rate, personal loan processing fees, repayment schedule, foreclosure charges, and other applicable terms. Also, make sure that you do not assume that every borrower will receive the same tenure or interest rate; do confirm the loan requirements.
Step 4
Choose a repayment period you can sustain
The ideal tenure will be the one where you can clear your EMI on time and still be able to fulfil other monetary obligations. In case the minimum duration puts pressure on your finances, then opt for the longer tenure. If you are capable of clearing a higher EMI amount, go for a shorter tenure.
Wrapping up
Some people find borrowing money through an instant loan app a complex task; however, with accurate information and well-planned steps, it is easy to borrow in a way that suits your life. Whether you are handling a medical emergency or renovating your house, a transparent financial partner can work wonders.
At Prefr, we believe in providing our customers with convenient, transparent, and hassle-free credit facilities. You can borrow up to ₹5,00,000 with tenures ranging from 6 months to 60 months. With a completely paperless process and immediate disbursal of the loan amount, we are here to assist you in your financial journey.
Frequently Asked Questions
What is a processing fee for a loan?
What do you need to apply for a loan?
Is it possible to apply for a personal loan with an income of ₹50,000 per month?
What if I want to settle my loan early?
Already have a loan?
Check your loan details, track your EMI and many more
