A Personal Loan is a type of unsecured loan which can be availed for any use.
The perks of availing a Personal Loan is that you do not require to give any kind of collateral or security while availing it. You have the convenience of using the funds according to your requirements.
Personal Loan is the instant answer to avail cash which can be used at your convenience either for medical emergency, wedding, renovation of your house, travelling, purchasing a house and anything else that you need money for.
Personal Loan is very popular because of its simple nature and flexibility. While, getting a Personal Loan seems easy, it is important to be careful while establishing the tenure of the loan.
What is Personal Loan Tenure
Personal Loan tenure is the time frame that is given to the borrower within which the loan has to be repaid with interest. It is essential for you to determine the right tenure to repay the loan as it plays a key factor on your interest rates as well as your EMIs.
There are two types of Personal Loan tenure :
Short Personal Loan Tenure: This type of tenure usually has high EMIs and interest rates. So, if you are opting for a short tenure, you need to plan your budget accordingly. There are good chances of you defaulting while repaying your loan if the EMI amount is high. Defaults in loan repayment results in penalty, which is imposed by the bank or NBFC. It affects your credit score as well.
Long Personal Loan Tenure : In terms of long Personal Loan tenure, your EMI is low due to its long term nature. A long tenure allows you a lot of time to repay the loan. This in turn increases the total interest that you need to pay. A long tenure makes the entire process of repayment easy and doesn’t leave a hole in your pocket.
Things to examine while Choosing Personal Loan Tenure
As discussed, it is very important for you to agree upon the tenure of your Personal Loan as it plays a key role in deciding your EMI and interest rate in repaying the loan borrowed by you. There are a number of necessary things to consider while choosing your Personal Loan tenure and they are:
➔Identifying your monthly funds
In order to remain unburdened, note down your monthly commitments against your monthly income to see how much is remaining. This aids in to your decision to choose a tenure for your Personal Loan.
➔ Current debts/liabilities
Prior to deciding on the tenure of your Personal Loan, it is very critical to know your existing liabilities. Some of the things that you need to keep in mind are your credit card bills, monthly expenses, school fees of your children, and household expenses before concluding on the extent of the tenure. Choose the term that can help balance your present obligations without hampering your existing finances.
➔Planned monetary prospects
If you are an employee who is already working as a professional and is sure about an upcoming hike in your salary, you can go for short term tenure. Though it has a high EMI rate, you can repay your loan in the shortest time period, and save on the total interest paid.
➔ Imposition of Interests
Be guarded while choosing your Personal Loan tenure. Explore the various tenure options while keeping the amount of your Personal Loan in mind. This will help you in determining your Personal Loan interest rate that you need to pay on the principal amount.
Reckon upon these key factors before deciding on the tenure of your Personal Loan.