How to Choose Your Personal Loan Tenure Wisely
Personal Loans are in vogue today because of their effortless and convenient approval process. They help you cover unforeseen costs like a medical emergency and can tide over tight finances during a major event like a wedding. Banks and financial institutions like Bajaj Finserv allow you to avail a Personal Loan up to Rs. 25 lakh with no hidden collateral or security charges.
Tenure and Loan Amount
A Personal Loan tenure in India is the period taken by a borrower to repay the entire debt with interest. Choosing a tenure for your loan makes all the difference to the loan amount you are eligible for. It also influences your EMI, interest rates and choice of bank. Here’s how you can choose the right tenure to maximize your benefit.
Apart from your credit score and income details, your choice of tenure determines your eligibility towards getting the right loan amount.
Minimum Personal Loan Tenure and EMIs
Opting for a short tenure reduces the overall interest you have to pay. EMI for this kind of tenure is generally expensive, partly because the rate of interest is usually high. This means that you will have to plan your budget extensively as a major portion of your income would go towards the EMI. The higher the EMI, the higher the chances of you defaulting with your repayment. This would cost you an additional penalty charge if the bank is stringent with its rules regarding defaulters.
With Bajaj Finserv, you can opt for a Flexi Loan which gives you the alternative of pre-paying your principal component, with no extra charges, in an easy, hassle-free transaction.
Maximum Personal Loan Tenure and EMIs
If you go with a longer tenure, banks are more open towards maximizing the amount you can possibly borrow. Longer tenure reduces the burden on your monthly expenditure and the bank foresees this technically as DBR (Debt Burden Ratio), which is to be maintained between 40%-60% of your monthly income. So the banks generally tend to be more open towards lending a larger sum with a longer tenure, as it is less financially risky.
When you stick to a longer tenure for your loan, the amount allotted for EMIs would be lower as compared to that of the shorter tenure. But this significantly increases the overall interest as you end up paying a higher number of EMIs. The benefit of this method of repayment is that you still get to maintain your lifestyle, without letting the EMI take a major chunk of your monthly income. This would also prevent you from defaulting on your payments, saving you from unnecessary penalties.
Before you apply for a Personal Loan, always consider how comfortable you are with the EMIs. Research the various Personal Loan options available in the market extensively, before you make a decision. Read more about the loan application process and other banking management services on the Bajaj Finserv website.