A personal loan is a viable credit option that extends instant financial assistance to individuals in dire need of funds. According to a new update from the Reserve Bank of India, the personal loan segment has escalated at a notable rate of 12.3% in FY22, which was 9.6% in FY21.
Such a significant escalation can be attributed to the instant availability of funds that borrowers repay over an extended period. Therefore, choosing the right personal loan tenor plays a significant role in the convenient repayment of the loan amount.
Moreover, it helps build credit records, allowing borrowers to receive lower interest rates. If borrowers want to reduce EMI liabilities, they can go for a personal loan with maximum tenor, which conveniently helps borrowers sail through the repayment period.
4 Tips of Choosing Personal Loans for a Maximum Tenor
Borrowers need to evaluate their repayment potential before choosing a loan tenor. Here are the tips that will guide borrowers to opt for a personal loan for a maximum tenor:
- Evaluate monthly income
Analysing monthly income status and expenses help borrowers make an apprised decision while choosing the right personal loan tenor.
If the maximum of a borrower’s income goes into managing monthly expenditures, he/she can go for a personal loan with maximum tenor. Depending on the expenses and savings rate, borrowers can conveniently choose the loan amount and loan tenor.
2. Ascertain the interest rate
Interest rate is another crucial factor that helps choose the right personal loan tenor. Settling for a higher interest rate will result in an increased EMI, eventually leading to borrowers choosing the longer loan tenor. However, if one can afford higher EMI liabilities, they can conveniently opt for a shorter repayment tenor.
Hence, it is imperative for borrowers to try out various permutations and combinations of loan amount and interest rate to determine the repayment tenor that best suits their repayment capacities.
3. Choose the loan amount carefully
The loan principal that a borrower desires to borrow plays a significant role in determining the right personal loan tenor. If borrowers avail of a smaller loan principal, they can easily go for a shorter repayment tenor. On the other hand, repaying a substantial loan amount will be easy with a longer repayment tenor.
4. Assess future financial prospects
Borrowers can also choose a loan tenor, depending on thire future financial prospects. For example, if a borrower is expecting a salary hike, bonuses, or other increments, it will become feasible to afford sizeable EMIs. Hence, they can go for a shorter repayment. Considering future financial status helps borrowers plan their personal loan EMI repayment better.
The best way to decide on the right personal tenor is to use an EMI calculator. It will allow borrowers to try different combinations of loan tenors, interest rate and principal amount and compute monthly payables. Knowing how to calculate personal loan EMIs beforehand will help borrowers settle for affordable monthly instalments and conveniently choose a loan tenor.
Furthermore, borrowers need to consider their financial liabilities while choosing a loan tenor. It might strain borrowers’ finances if they have to repay the clear existing debt, prompting them to unnecessarily stretch their repayment tenor.
In this context, knowing how to clear overdue payments with a personal loan proves beneficial as it helps borrowers opt for a shorter tenor.
Another effective way to manage loan repayment is by obtaining a loan statement. For example, if borrowers are availing of a personal loan from Bajaj Finserv, they can obtain a Bajaj Finserv loan statement, helping them check loan outstanding and plan repayment schedules accordingly.
Know the importance of choosing a suitable loan tenor
Choosing the right repayment tenor helps borrowers in the following ways:
- It helps borrowers develop healthy credit records and boosts credit scores, enabling borrowers avail lower interest rates.
- The flexibility of the loan tenor allows borrowers to repay the loan amount within time and manage other financial liabilities well.
With choosing the right suitable loan tenor, borrowers must check the exclusive pre-approved offers as extended by leading financial institutions on a wide range of financial products like personal loans, business loans, credit cards, etc. These offers expedite the lending process and make the borrowing hassle-free. Willing individuals can check their pre-approved offers by submitting their names and contact details.
To sum up, choosing a suitable repayment tenor, whether a personal loan with maximum tenor or a shorter tenor, helps borrowers manage loan and plan the repayment schedule conveniently. Borrowers should consider the EMI amount and interest rate to decide on a suitable loan tenor. Choosing a suitable loan tenor enables borrowers to manage their finances and handle their financial objectives.