Personal loans are in vogue, mainly because of the ease and convenience associated with them. Unlike other loan options, you can use a personal loan to meet any of your needs and the lender would happily disburse the loan in the shortest possible tenure, provided all the things are in order. While the simple and transparent access to personal loan makes it an attractive option, it is essential to be extra cautious when it comes to deciding the tenure of the loan.
Personal Loan Repayment
Personal Loan Tenure
Usually, the tenure of a personal loan can be divided into the following two categories:
- Short Personal Loan Tenure: By opting for the short tenure, a borrower can reduce its interest outgo. However, EMI for this type of is usually high, and therefore, it is necessary to plan your budget carefully as the portion of your income would go towards the EMI. Further, the higher the EMI of your loan, the higher would be your chances of defaulting with the loan repayment. It would also translate into the penalty, which is usually levied by banks on its defaulters.
- Long Personal Loan Tenure: In case of tenure, banks are usually more open towards setting the maximum limit on the amount that can . Also, as the EMIs are low in case of tenure, it will reduce the burden on your monthly finance. Further, the long tenure lets you enjoy your lifestyle without putting stress on your finances. Also, a long tenure protects you from defaulting on your payments, and thus, saves you from penalties. But unfortunately, it increases the overall interest which you would be shelling out towards your loan repayment.
Monthly Budget: It is one of the most factors that can aid you in the right for your personal loan. Jot down your entire money commitments and vet it against the monthly income to calculate the residual income. Based on what is left, you can decide the tenure of your loan. Make sure that you do not burden yourself with additional monetary pressure every month.
Future Financial Prospects: If you are a salaried professional and to get a salary hike , you can go with the shortest tenure and pay a higher EMI every month. This way, you would be able to repay your loan early.
Existing Liabilities: While deciding the tenure of a personal loan, it is imperative to consider your liabilities as well. Other loans, credit card repayment, household expenses, children’s school fees are some of the commitments that need to into consideration. Be sure to choose a tenure which helps you balance all your current obligations without stressing your current finances.
Interest Charges: Naturally, personal tenure means you would have to pay high interest charges. So, while deciding the tenure, use the combination of various tenure options with the proposed personal loan amount to compute the interest that you would have to pay along with the principal amount.
In a nutshell, be discreet while choosing the personal loan tenure. After all, you would never want to take a loan which you keep paying for many years, right?
Tags: Personal Loan