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Personal loans are in trend, principally as a result of the simplicity and comfort related with them, aren’t they? In contrast to other credit choices, personal loans give you the freedom to utilize the amount to address any of your issues and if the documents are in place you get the loan amount quite quickly
While the basic and hassle-free access to personal loan makes it a tempting choice, it is ideal to be additionally mindful with regards to choosing the tenure of the loan as there are a few points that you should consider.
Before we move towards the factors you need to consider for picking the tenure, let’s know a little more about the different tenures that you can opt for.
A personal loan tenure can be of two types mentioned below:
Short Personal Loan Tenure: By choosing the short tenure, you can decrease the interest you pay over the period of loan. On the other hand, the EMI for this kind of loan is generally high. Hence, it is important to design your financial plan cautiously as the part of your salary would go towards the EMI. Further, the higher the EMI of your loan the higher would be your odds of defaulting with the credit Repayment. It would likewise convert into the penalty which is normally levied by banks on its defaulters.
Long Personal Loan Tenure: When it comes to tenure, banks are normally very open towards setting the most extreme limit on the sum that they can. Additionally, as the EMIs are low, it will decrease the weight on your month to month budget. The long tenure gives you a chance to make the most of your lifestyle without putting a dent on your accounts. A long tenure shields you from defaulting on your installments and in this way, spares you from penalties. However sadly, it increases the general interest which you would spend towards your credit Repayment.
Now that we have talked about both the tenures. Let’s examine the pros and cons that you need to considered while picking the personal loan tenure.
Month to month Budget: It is one of the most important factors that help you with your personal loan. Scribble down your whole cash duties and weigh it against the month to month salary to compute the remaining pay, based on what is left you can choose the tenure of your loan. Ensure that you don’t load yourself with extra fiscal weight each month.
Future Financial Prospects: If you are a salaried employee and to get a raise in your monthly pay, you can go with a shorter tenure and pay a higher EMI every month. This way, you would be able to repay your loan early and pay less interest that you would have paid in longer tenure.
Existing Liabilities: While choosing the tenure of personal loan, it is very important to consider your liabilities involved too. Different loans, credit card repayment, household expenses, children’s school fees are a portion of the responsibilities that need to be taken into account. Make sure to pick a tenure which encourages you to balance all your present commitments without stressing on your present funds.
Interest Charges: Naturally, personal loan tenure implies you would need to pay high-interest charges. So, it is very important to compare different tenure options and compute the interest you would have to pay along with the principal amount.
More or less, be tactful while picking your personal loan tenure and consider all the above-mentioned factors for a smooth sailing repayment.