Personal loans are an effective way to finance purchases or endeavours which seem unaffordable at the time. They can support you in a financial or medical emergency that has arisen unexpectedly.
A personal loan is an unsecured loan obtained from a bank or financial institution by an individual to meet their own monetary needs, whatever they may be. The loan is repaid in small amounts known as ‘Equated Monthly Instalments’ (EMI) over a period known as the loan tenor or loan term. Indian financial institutions generally set a personal loan maximum tenor of up to 60 months.
Personal loan duration
This term period ranges from 12 months to a maximum of 60 months for a personal loan. A personal loan’s amount, interest rate, and EMI can vary depending on the borrower’s income, credit history, and needs. Furthermore, these are the critical factors in determining the loan parameters. In addition to these factors, the bank or financial institution may consider the borrower’s retirement age and employment status.
Because personal loans are typically unsecured, none of the borrower’s assets can be auctioned off if they fail to repay. This results in a slightly riskier investment for the lender and a safer investment for the borrower. Personal loans are rapidly becoming a very appealing means of personal financing, as evidenced by the fact that the sector has grown at a CAGR of 17 per cent in recent years. It has been responsible for a large portion of the annual incremental credit across major sectors over the last couple of years.
Personal loans, like all loans, necessitate careful consideration. There is a strong relationship between the term of your loan, the EMIs you will pay, and the total amount returned to the lender. A long tenor, for example, would result in lower EMIs because the sum is spread over a longer period, but it also means more accumulated interest and a higher overall repayment amount. On the other hand, a shorter tenor would result in higher EMIs but less accumulated interest and a lower overall repayment amount. As a result, a delicate balance must be struck between these three factors to ensure a payment plan that does not jeopardise your financial prospects.
There are several additional factors to consider when deciding on an appropriate personal loan tenor.
Ways to increase the personal loan tenor
There are two effective methods for extending the term of your personal loan:
Option 1: You may request an extension of the tenor from your lender by submitting a written application. Simply state the reasons for the request and any supporting evidence.
Option 2: Transfer the balance of your personal loan to another lender. You can choose a longer loan term if you transfer the balance to another bank.
Choosing the right personal loan tenor for you is a critical step in the loan application process because it determines the total amount you must repay as well as the rate of interest. While the maximum personal loan tenure of 5 years allows for lower EMIs, the interest accrued over a longer period may result in a significantly higher repayment sum. On the other hand, choosing a shorter tenor will force you to pay a higher EMI, which will consume a larger portion of your monthly income. As a result, the first step toward selecting an appropriate tenor is to understand your own repayment capability.
A personal loan EMI calculator is a convenient way to accomplish this. It’s incredibly user-friendly and can assist you in determining the best combination of tenor and monthly payments for your financial needs. Enter the principal amount, interest rate, and loan term to calculate your EMIs. You can proceed with your application for a personal loan once you’ve determined your applicable EMI tenor. Suppose everything is favourable and you meet all the eligibility criteria. In that case, your application can get approved instantly, and the funds will be transferred to your bank account within a short time. Once your loan is approved, you can use a self-service portal to manage your loans, download loan statements and have a comprehensive overview of your loan, EMIs and more.