In today’s time, there are many instances in our lives when we find ourselves short of money. One of the best ways to tackle this problem is by taking an instant loan.
The three most important factors to consider while taking a personal loan are loan amount, interest rate and repayment tenure.
In this blog, we will discuss the repayment tenure, minimum and maximum tenure, how it affects the loan, etc.
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A loan tenure is the number of Equated Monthly Instalments (EMIs) a borrower takes to repay a loan. When you take a personal loan, you have to select a repayment tenure that goes well with your budget.
A personal loan maximum tenure is the maximum amount of time offered by a loan provider to pay back the loan. Different lenders have different maximum tenures. For example – Zype gives a maximum of 12 EMIs to repay the loan.
Your loan tenure affects your EMI amount and interest amount of your personal loan. The decision of choosing a loan tenure should depend on the loan amount you want, your salary, monthly expenses and existing EMIs.
When you choose a personal loan with high tenure, you spread your payments over a longer period of time. This also reduces your EMI amount. Hence, if you are taking a large amount of loan, you should choose maximum loan tenure so you can always repay comfortably and on time.
Different loan companies offer different minimum personal loan tenure. For example, the minimum loan tenure offered by Zype is 3 months. The best part about choosing a shorter tenure is that you pay less interest cost as compared to long repayment tenures. You should go for a minimum loan tenure if you can easily pay the EMI amount.
Zype users can choose to pay in 3, 6, 9 and 12 EMIs. You should go for a maximum personal loan tenure if
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This is the ratio of the sum of your existing EMIs against your monthly income. If you have a high DTI ratio, you should choose maximum repayment tenure.
If you’re taking a high loan amount, you should consider choosing a longer tenure and vice versa. Choose a tenure in which you are able to comfortably pay your EMIs.
You should take into account your salary and expenses to calculate the EMI amount you can pay and accordingly choose the personal loan EMI tenure.
1. Lower EMI Amount
The longer your tenure, the lower your EMI amount. This is because the loan amount gets divided into a large number of EMIs.
2. More Disposable Income
Since you pay less EMI amount when you choose a longer tenure, you enjoy more disposable income.
3. Easy to Manage Budget
SInce you are not burdened to pay a high repayment amount every month when you choose longer tenures, it becomes less stressful to manage the monthly budget.
1. More Interest Cost
You have to pay interest on the outstanding amount of your personal loan every month. This means that the longer your personal loan repayment period, the more interest cost you would end up paying.
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Your EMI amount would be higher if you select a minimum tenure for personal loan since each EMI will cover a big portion of the principal amount and interest.
Whereas, if you select a longer tenure, your EMI amount would be much less since the loan amount is spread over a larger number of instalments.
A personal loan with high tenure will be more costly than a personal loan with minimum tenure. This is because you pay interest for less number of months when you choose a shorter repayment period. You should choose a shorter tenure only if you can pay the higher EMI amount with ease.
If you find yourself in a situation where you have to change your loan tenure, you can try out these steps –
1. Understand your Loan Terms – Before you reach out to your lender, make sure that you have a clear understanding of important factors of your loan like EMI amount, interest rate, etc.
2. Ask the Lender to Change Loan Tenure – You can request your bank or NBFC to change the loan tenure. Tell them the reason you want to change the tenure, new tenure that works for you and submit the necessary documents.
3. Alternatively, you can take a debt consolidation loan with a more convenient loan tenure and repay the existing loan in a lump sum.
Also Read: Why Opting For an NBFC Personal Loan is a Better Option?
You should always think it through before choosing between longer and shorter repayment plans. Based on your income, loan amount, interest rate, expenses and existing EMIs, you should choose a repayment tenure that is affordable as well as comfortable to manage.
Use Zype’s personal loan EMI calculator to compare EMI amounts for various tenures and decide accordingly.
With Zype, you can get instant personal loans up to ₹5,00,000 and pay later in flexible 3, 6, 9 and 12 EMIs.