A Personal Loan is convenient for covering your immediate needs. It is an Unsecured Loan offered by various banks based on factors like income level, credit history, repayment capacity, etc. You can repay your Personal Loan using smaller equated monthly instalments. This Loan is easy to understand, and you can use the money for any legitimate financial need.
This includes paying for a home renovation, a dream vacation, business expansion, and more. When you apply for a Personal Loan, you can select the tenure. Let us learn about Personal Loan tenures and ways to select one.
What is the Personal Loan tenure?
Understanding the finer points of a Personal Loan can be crucial, especially when borrowing for the first time. One of the things you need to check is the Loan tenure. This is the time the borrower takes to repay the principal and interest of their Personal Loan to the bank. It is the duration between the time of disbursal of the Loan and the date on which you must pay your last equated monthly instalment.
How to select the Personal Loan tenure?
When borrowing a Personal Loan, you can select its tenure. The Loan tenure also affects your eligibility. To determine the sum you qualify for, use a Personal Loan eligibility calculator. To decide the Personal Loan tenure, you can check the following:
- Understand the Loan amount
The Loan amount is the sum you want to borrow from the bank. The tenure of your Personal Loan depends heavily on the sum you hope to borrow. It is best to have a shorter Loan tenure if you have borrowed a small sum of two to three times your monthly income. This is because the interest is higher when you select a longer tenure.
On the other hand, if you want a Loan that is six to eight times your monthly income, pick a longer repayment tenure. In this case, a shorter tenure can burden your finances, increasing your risk of default.
- Use an online calculator
Just like a Personal Loan eligibility calculator, you also find an EMI calculator online. Use them to determine the tenure that matches your situation.
- Check the breakdown of monthly income
Before agreeing to the Personal Loan, list your monthly savings and expenses. Assess your outstanding debt as well. Then, match the size of your Loan and its tenure to your savings and spending habits.
Conclusion
A Personal Loan is convenient and a good option when you need funds quickly. However, you need to make an informed decision when choosing the Loan tenure. Ensure you select one that lets you afford your EMI every month.
