Personal loans are now the trendy loans for hassle-free and immediate funds. No collateral would put in the way of such dream holidays or spontaneous medical bills; they are indeed fantastic for home repair work as well. However, a crucial fact often overlooked when considering a personal loan is its duration.
Deciding on the duration you want to repay your borrowed money can affect your monthly EMIS and the overall cost of the loan.
What do personal loan terms mean, typical maximum and minimum periods lenders offer, and understanding how to decide which one’s suitable for you: everything is covered in detail here.
Understanding Personal Loan Tenure
Before delving into the figures, we need to clarify what a personal loan tenure means. It’s the time frame in which you repay a loan, including both the principal amount and interest on it. The tenure can range from 6 months to 7 years, depending on the lending institution’s policies, the customer’s creditworthiness, income, and the requested loan amount.
Your choice of personal loan tenure will directly affect your monthly instalment amount and the total interest paid on the loan during that term. Understanding its implications is thus one key to sound financial planning.
What’s the Maximum Duration for Personal Loan Tenure?
Most banks or lending institutions offer a maximum personal loan tenure of 5 to 7 years. The maximum number of months is compelling as it reduces your monthly EMIS, making it relatively easier to manage them in the short term.
Suppose you take a loan of ₹5,00,000 on a yearly interest of 10% and keep the tenure for seven years. Now, you will be required to pay a lower EMI every month, making the loan appear more manageable. But you will pay more interest throughout the life span of that loan. Hence, lowers immediate financial burdens, but on the other hand, it increases the overall cost of the personal loan.
This is suitable for borrowers who prefer smaller EMIS or are well-positioned to secure long-term funding and want to spread their repayments.
What is the Personal Loan Tenure Minimum Duration?
It would be advisable to opt for a shorter term if one is quite sure of their repayment capacity and intends to pay off the loan as quickly as possible. Most banks offer a minimum personal loan duration of 6 to 12 months.
So, if you take ₹5,00,000 at 10% interest for one year, the EMIS will be higher because they are paid off staggered over a shorter duration; however, the total interest paid will be considerably lower. Short-term personal loans are more economically beneficial in the long run. The best option for borrowers who have a good income monthly and want to avoid long-term obligations. This is also beneficial for individuals who need to save interest and maintain a clean credit history by quickly closing all loans.
Key Factors to Consider When Choosing Your Loan Tenure
When selecting your personal loan tenure, there are a few key factors that cannot be ignored. Choosing a loan tenure becomes 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 loan tenure should be selected in consideration of your ability to bear the monthly EMI while still being able to make your essential payments and savings. If one has a stable and sufficient income, then the prospect of a shorter tenure is doable.
2. Interest Liability
Long-term personal loans involve low EMIS but also entail higher interest outgo. Generally, compare the interest payable on the total loan amount across different tenures to arrive at a tenure that lies comfortably within your budget and aligns with your financial goals.
3. Future Monetary Plans
Do you foresee any changes in salary or significant expenses on the horizon? In either case, you can set a matching loan schedule. Consider a shorter tenure if your income is expected to be higher; a longer tenure will ease your cash flow in light of potential heavier expenses that may arise.
4. Amount of Loan Required
The bigger the loan amount, the longer the repayment period would generally be required; conversely, smaller loans can be repaid in shorter durations without much hassle.
5. Make use of EMI calculators
You can explore different tenure options using EMI calculators available online; doing so will give you an idea of the monthly cost of each option, aiding your decision.
Interest Rate v/s Tenure: The Balancing Act.
The interest rate, personal loan tenure, and the EMI itself are directly linked. Here’s how you go about this:
- Longer Tenure: Lower monthly EMIS, higher total interest. Suitable for you if you prefer a longer duration with stress-free repayments, but are willing to pay more.
- Shorter Tenure: Higher monthly EMIS, lower total interest. This option is perfect for someone whose income potently covers the EMIS on loan amount and wants to minimise interest.
Don’t miss out on the fact that your credit score comes into play here; good scores will allow you to enjoy lower interest rates, thereby diminishing the impact of your chosen tenure.
Easy Financing, Now at Your Fingertips
When it comes to securing quick, hassle-free funds, Stashfin stands out with its flexible personal loan offerings. Suppose you’re looking for a short-term loan for immediate expenses or a longer personal loan tenure for more manageable repayment. In that case, Stashfin offers instant loans of up to ₹5 Lakhs with minimal documentation and fast approval.
Stashfin differentiates itself by offering a simple interface, rapid approval, and customisable loan terms tailored to individual requirements. You get to pick a tenure that best matches your earnings, lifestyle, and plans, all with competitive interest rates and no hidden costs.
From salaried professionals to self-employed individuals, Stashfin caters to a wide range of customers, making it your ideal financial partner for every situation.
