A personal loan is the credit option of choice for an increasing number of borrowers in India. Be it a vacation abroad, a medical emergency, or a destination wedding, a personal loan can help you manage the costs. It has numerous advantages, such as:
- A quick approval time
- Get funds in your account within a short time
- Collateral-free, so you do not have to pledge any asset against the loan
- No end-use restriction. You can use the loan for a variety of purposes
However, it does not imply that you should choose a longer term with lower EMIs or vice versa. A personal loan maximum tenor, on the other hand, results in a higher EMI amount but a lower overall repayment.
Importance of choosing the right personal loan tenor
Selecting the appropriate tenor enables you to pay your EMIs without any burden. It helps you build a positive credit history and a higher credit score, allowing you to get competitive interest rates on future loan applications.
What is the personal loan maximum tenor?
Personal loans in India are typically granted with a repayment period of up to 60 months by most financial institutions. Flexible repayment terms enable debts to be paid off in manageable monthly installments. As a result, people can opt for a personal loan with a longer repayment period, which translates into lower EMIs. It reassures financial institutions that payments will be made on time and without fail.
Although a personal loan has a maximum tenor of 5 years, it is also important to understand the minimum duration required to service this collateral-free credit.
How to choose the best loan duration?
It is not advisable to take out a personal loan for the maximum amount of time. Instead, use this guide to determine the best loan duration:
- Understand your monthly expenses.
Analyzing your expenses and savings is a tried and true method for determining a suitable personal loan maximum tenor and EMI amount. Make a list of your monthly obligations before applying for the loan. Consider whether you have any outstanding debts and the length of time they will last. Using an instant loan app, you can choose your personal loan amount and term length based on your spending habits. The 50/30/20 rule states that you should spend 50% of your income on fixed and variable expenses, 30% on non-essentials, and the remaining 20% on savings and debt.
- Understand the size of your loan.
The loan term is determined by the amount of your personal loan. For small loan amounts, such as borrowing 2-3 times your monthly income, aim for a shorter loan tenor because a longer personal loan tenor increases your interest cost.
Similarly, if you’re borrowing 6-8 times your monthly salary, select the longest personal loan repayment period possible. Choosing a short term will be a difficult burden to bear.
- Calculate your interest rate
Your credit score, which also influences your personal loan eligibility, determines the personal loan interest rates you will get. You can also use the EMI Calculator for Personal Loans to calculate your EMI. Simply enter the loan amount you require. Aside from your credit score, the loan term you select influences the interest rate. Longer loan terms result in higher interest charges, while shorter loan terms result in lower interest rates.
Individuals can also shorten the term of their personal loan by using the part-payment option. Borrowers can use this option to repay a lump sum before the term ends, reducing the interest burden while keeping the monthly payment intact.
Now that you know the personal loan maximum tenor, do the math to determine the best repayment schedule for your needs.