How to Choose Personal Loan Tenure Wisely
A personal loan can be your savior in times of need. The advantages of a personal loan are many:
• It has a quick turnaround time - lenders process your loan application quickly
• The loan amount is disbursed speedily - as soon as you are found to be creditworthy (Click here to get a free credit health check!)
• It is unsecured - meaning you need not pelage any sort of collateral to avail the loan
• The end use of the loan could be anything - as long as its legitimate
Keeping the advantages in mind, it is also important to note that personal loans are among the most expensive loans in the market. They come with the highest interest rates since they are unsecured and the lender has no safeguard against default.
The interest rate on a personal loan could range from as low as 12% p.a. to as high as 32% p.a. It is influenced by a variety of factors, your credit history is the major one.
Are you looking for a personal loan and wondering how to choose a loan tenure as per your budget? Read on to know more!
So, how do you choose the personal loan tenure? Following are a few pointers to guide you and help you make the best loan decision.
The foremost factor to keep in mind while choosing a tenure is the monthly EMI outgo and the interest rate. Say you have been offered a loan of Rs. 2,00,000 at 13% p.a., your EMI would be around Rs. 5365 for a tenure of 4 years. If you choose a tenure of 5 years, then the EMI would be around Rs. 4551.
Most of us would be tempted to go for the lowest EMI since it reduces the monthly outgo. You end up paying a lower EMI if you choose a longer tenure and vice versa. However, note that you will also be paying extra money in the form of interest if you choose the longer tenure.
Also important is the prepayment terms. If you plan on prepaying your loan amount within a year, then you could opt for a longer tenure to reduce your monthly outgo. Keep in mind the prepayment penalties while choosing a tenure. Typically, lenders charge around 2% to 4% of the outstanding amount as the prepayment penalty.
Follow the above-mentioned points while choosing a loan tenure and decide accordingly. Keep your budget in mind when you opt for a personal loan product.