FINCOVER: Personal Loan's Maximum and Minimum Tenure

ATK
New Delhi [India], July 1: Personal Loan is one of the best options to fulfil an immediate financial obligation. Whether it is for a medical emergency or damaging your repaired home, you can do easily by
. The biggest advantage in a personal loan is its flexibility. One of the important components in a personal loan is the tenure. The tenure is the timeframe of the loan. In order to avail the best personal loan in the market, it is important to take it into account.
Maximum Tenure of Personal Loan
Personal Loans are given for a maximum tenure of upto 7 years. Since the borrower has a considerable chunk of time to repay the loan, the people who avail personal loan on a longer tenure can obtain an affordable EMI that would in no capacity affect your normal side. On the flip side, the longer the tenure is the higher interest charges you will pay and vice versa. The overall cost of your loan will be way too high when
with shorter tenure. Since, personal loans are unsecured loans; banks approve loans in longer tenure only to people who satisfy their Personal Loan eligibility criteria. People with lower monthly income who cannot afford to pay a higher EMI can opt for personal loan with longer tenure. Though there is an option to preclose the personal loan, there is a minimum period of EMI that you will have to pay. The period differs from lender to lender.
Minimum Tenure of Personal Loan
Generally, the minimum tenure in a personal loan is one year. It must be noting that though loan repayment will be shorter; the monthly EMI will be on the higher side. Similarly, choosing a personal loan with a lower tenure means you will be able to get the loan at a lower interest rate that can maximize savings. Since a shorter tenure reduces the lending risk, the lenders offer better interest rates for short term loans.
If you want to have a clear picture of what will be advantageous to you, we suggest you to use an EMI calculator which will give you a detailed breakdown of your monthly instalments.
For example, assume you are taking a loan of Rs 10 Lakhs at a rate of interest of 14 per cent in a period of 7 years, then the EMI is Rs 16252 and the total interest charge you are going to pay is Rs 482829.32, on the other hand if you are taking the same loan amount for a period of two years, you will pay an EMI of Rs 47073 and overall interest of 129763.28. Clearly you can see loans with a higher tenure cost you more.
What are the factors to consider while choosing loan tenure?
Net salary
As a thumb rule, your debts should never exceed more than 40 per cent of your salary. If you do not have any personal loan, go for a loan where the EMI does not exceed more than 40 per cent of your monthly salary. If you already have a loan, opt for a loan where the EMI does not eat up more than 15-20 per cent of your salary. Keep the funds required for taking care of your regular expenses, and check what is left for your EMI commitments.
Interest rates
There are numerous lenders in the market running enticing ads for the loan products. Unassuming borrowers get enchanted by the loan amount without checking the interest rates of the loan. In the end, when they fall into a vicious bad debt trap. It is advisable to go for personal loans with lower rate of interest generally. It will help you finish your loan commitments in a shorter tenure. On the other hand, if you fall in the low-income bracket, go for a loan with longer tenure. It ensures you pay a given EMI regularly every month.
Use an EMI calculator
The best way to know complete details about the loan is to make use of a Personal Loan EMI Calculator which will give you a thorough breakdown of the principal and interest over the entire tenure of the loan. It gives you an idea how much your loan costs, knowing which you can take a well-informed decision
Conclusion
The tenure is an important factor when it comes to choosing a personal loan. Hope this article would have thrown some light on it. Factor in these elements, calculate your existing loan commitments and take a well-informed decision.
(Disclaimer: The above press release has been provided by ATK. ANI will not be responsible in any way for the content of the same)