How To Choose A Personal Loan With The Maximum Tenor

The personal loan segment has escalated from Rs.75,088 crore to Rs.147,236 crore in value and Rs.3.99 million to Rs.15.8 million in terms of volume from FY19 to FY22. Small ticket credit option like personal loans has proved to be an effective source of deriving funds. Individuals can use the fund for varied financial requirements. 

Notable benefits like substantial loan amount, no-end use restrictions, and flexible loan tenor add to the robust demand for this credit option. However, it is the loan tenor that determines how comfortably a borrower will manage the loan principal. Moreover, the loan tenor impacts the EMI amount and total interest outgo. Hence, borrowers must know the intricacies of choosing a personal loan with maximum tenor or shorter tenor, depending on repayment convenience. 

Know How to Choose the Personal Loans for a Maximum Tenor

Borrowers availing of a personal loan must follow the mentioned steps to choose a personal loan with maximum tenor:

• Compute monthly expenditure: Before deciding on the loan tenor, borrowers must factor in their monthly expenditure and income status. Sort out all the expenses and distribute them against monthly income to determine residual income status. Depending on the residual income portion, borrowers can decide on the convenient repayment tenor. 

In case borrowers’ earnings do not suffice the monthly expenses, they can go for an extended repayment frame. Hence, it is important to consider saving and spending rates before deciding on the loan tenor.

• Choose the interest rate accordingly: The tenor borrowers will opt for has a significant impact on the total interest payable. For example, settling for a longer loan tenor will increase the overall interest outgo. On the other hand, a shorter loan tenor will reduce the total interest payable. 

Hence, if a borrower wants to minimise the loan expenditure, they must settle for a shorter loan tenor. To lower the interest outgo and plan repayment structure, borrowers should obtain a loan statement and keep a check on the outstanding balance. 

• Consider future financial prospects: Repayment tenor is also impacted by borrower’s future financial prospects. Borrowers can conveniently opt for a shorter loan tenor if they expect a hike in their salary, bonus, or other financial increments. In such scenarios, borrowers can also opt for prepaying loan amount or increasing the EMI amount, helping them shorten the loan tenor, foreclosing the loan and minimising the overall interest outgo.  

• Existing liabilities: Before deciding on a loan tenor, borrowers must factor in current financial liabilities. Either borrower can try clearing the existing debts or confirm that the repayment period of the loans does not coincide. Borrowers must avail of a personal loan after clearing maximum existing financial liabilities. It will help them manage loan repayment effectively. Hence, borrowers should opt for a loan term to help them manage all financial obligations with ease.

• Choose loan amount wisely: Loan principal influences the repayment tenor. If borrowers have opted for a higher loan principal, they must opt for a longer repayment tenor to lower the EMI burden. On the other hand, for a smaller loan principal, borrowers must opt for a shorter loan tenor; this will help them save up on the interest outgo. 

• Use a personal loan calculator: The most convenient way to choose the right personal tenor is to use the personal loan calculator. This online tool gives one a well-rounded idea regarding the financials associated with borrowing, helping one choose a convenient loan term. To choose the tenor wisely, borrowers must know how to use a personal loan calculator.

Advantages of Opting for a Personal Loan With Maximum Tenor

There are several reasons why choosing a personal loan with maximum tenor proves beneficial:

• Reduces EMI liability: Choosing a longer repayment frame helps borrower lower their monthly instalments, dodge monetary burdens and plan personal loan EMI repayment better.

• Improves credit score: Longer repayment tenor helps borrowers repay the loan amount on time, leading to improved credit score. In this context, borrowers should know how CIBIL score is important for personal lending.

• Enhances loan eligibility: Extended repayment tenor makes it feasible for borrowers to pay EMI amount without any delay, which assures the lender of low-risk lending hence improving the loan eligibility.

Apart from selecting a suitable loan tenor, borrowers must keep a check on the exclusive pre-approved offers as extended by leading financial institutions. These offers are available on a wide range of financial products like personal loans, business loans, credit cards etc., and ensure an expedited loan application process and save turnaround time. Willing individuals can check the pre-approved offers by submitting their names and contact details. 

To sum up, choosing an optimal loan tenor helps one manage EMI liability, keeping into consideration one’s monthly income and other financial obligations. Therefore, borrowers should either opt for a personal loan with a maximum tenor or a shorter tenor based on the repayment potential.

Read Also: Why Should You Choose Personal Loans for a Shorter Tenor?