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Decoding Flexible Personal Loans and How They Work

Life is often unexpected and financial needs can arise without any warning, requiring us to seek additional funds. Flexi-personals, also known as flexible loans, offer borrowers more control and convenience in accessing finances. A flexible personal loan is a type of personal loan that allows you to borrow funds up to a pre-approved limit. You can withdraw the amount you need as and when you need it, and you only pay interest on the amount you use.  

Unlike traditional personal loans, which offer a lump sum amount upfront, flexible personal loans give borrowers the freedom to withdraw and repay funds multiple times during the loan tenure. Therefore, flexible personal loans offer a convenient way to borrow money, as you can use it for any purpose, and you only must repay the interest on the amount you have actually borrowed.  

Let us explore, in further depth, the concept of flexible personal loans and their varied aspects.

How Do Flexible Personal Loans Work?

Flexible personal loans are significantly different from a general personal loan or credit cards. Here are their key aspects that make flexi-personal loans completely unique: 

Credit Limit

When you opt for a flexi-personal loan, the lender grants you a pre-approved credit limit based on your creditworthiness. This limit represents the maximum amount you can borrow. 

Withdrawals and Repayments

Within the credit limit, you can make withdrawals and repayments as per your financial requirements. You have the flexibility to withdraw any amount, multiple times, up to the sanctioned limit. Each withdrawal creates a separate loan account or sub-account. 

Interest Calculation

Interest is only charged on the amount you have withdrawn and the duration for which you utilise the funds. For example, if your credit limit is ₹10,000, and you have withdrawn ₹5,000, interest will be calculated on the utilised ₹5,000 and not the entire limit. 

Repayment Flexibility

One of the key advantages of a flexi-personal loan is the ability to repay funds at your convenience. You can make repayments anytime, either in full or partial amounts, without any penalties. The repaid amount becomes available for future withdrawals. 

Interest-only Payments

Some lenders may provide an option for interest-only payments. This means you can choose to pay only the interest accrued each month and repay the principal amount at the end of the loan tenure.

Benefits of Flexible Personal Loans

Why should you get a flexi-personal loan instead of a personal loan? Here’s why flexible personal loans are leaps and bounds beyond general personal loans: 

Cost Savings

With a flexible personal loan, you can minimize interest payments by withdrawing funds only when needed and repaying them promptly. This can lead to significant interest savings compared to a traditional loan where interest is charged on the entire principal from the very beginning.   

Financial Convenience

Flexibility in withdrawals and repayments provides greater control over your finances. You can align your loan usage with your expenses, ensuring that you have funds available for emergencies or planned expenditures.   

Reduced Interest Burden

Flexil loan interest rates can vary depending on factors such as the borrower’s creditworthiness, loan amount, and repayment term. However, by making partial or full repayments, you can reduce your outstanding principal, resulting in lower interest charges over time.   

Interest Offset

Some lenders offer flexible personal loan interest offset facilities where the interest earned on your savings or deposits is used to offset the interest on your loan. This further reduces your interest liability.

The Difference Between Flexible and Traditional Personal Loans

Feature Flexi-Personal Loans Traditional Personal Loans
Interest Calculation
Interest is charged only on the utilized amount, not the entire loan amount.
Interest is charged on the entire loan amount from the beginning, regardless of the amount utilized.
Repayment Flexibility
Allows borrowers to withdraw and repay funds within the approved credit limit during the loan tenure.
Repayment follows a fixed schedule with fixed EMIs over the loan tenure.
EMI Structure
EMIs may vary each month, depending on the withdrawals and repayments made.
EMIs remain constant throughout the loan tenure.
Interest Cost
Potentially lower interest cost as interest is charged only on the outstanding balance.
Higher interest cost due to interest being charged on the full loan amount from the start.
Borrowing Convenience
Provides quick access to funds as borrowers can withdraw funds multiple times without reapplying for a new loan.
Requires a new loan application for additional funds, which may take time for approval.
Prepayment Penalties
Some lenders may not charge penalties for prepayment or offer reduced charges.
Prepayment penalties may be applicable, leading to additional charges for early loan repayment.
Suitability
Ideal for individuals with irregular cash flows or uncertain funding needs.
Suitable for individuals with predictable cash flows and specific funding requirements.
Credit Score Impact
Responsible utilization of available funds may positively impact credit score.
Timely and consistent EMI payments positively impact credit score.
Documentation
Documentation is required only once during loan approval.
Standard documentation required during loan application.
Credit Limit
Borrowers are assigned a credit limit, and they can borrow up to that limit.
Borrowers are approved for a specific loan amount, and additional borrowing requires a new loan application.

How to Apply for A Flexible Personal Loan?

If you are convinced and in the market for a flexi-personal loan, follow these steps to get your hands on this convenient and ingenious form of credit: 

STEP 1- Determine the Lender and Loan Amount

Compare the interest rates, fees, repayment terms, and other relevant factors related to flexi-personal loans. Look for lenders who have a good reputation and favorable terms that align with your financial needs. Assess your personal financial needs, how much credit do you need, and can the lender provide it to you? 

STEP 2- Evaluate Eligibility Criteria

Review the eligibility criteria set by the lender you have selected. Typically, these criteria include factors such as age, income level, employment stability, credit score, and residency status. Ensure that you meet the requirements before proceeding with the application. 

STEP 3- Prepare Documentation

Gather the necessary documents required by the lender. The typical document requirements for a flexi-personal loan include: 

  • Identification documents (e.g., Aadhaar, passport, driver’s licence) 
  • Proof of income (e.g., salary slips, bank statements, tax returns) 
  • Proof of address (e.g., electricity or water bills) 
  • Employment details (e.g., employment contract, employer contact information)  

STEP 4- Fill and Submit the Application Form

Visit the lender’s website or branch office to obtain the application form. Fill out the form accurately and provide all the requested information. Double-check the form for any errors or omissions before submitting it. 

STEP 5- Your Credit Assessment

Once you submit the application form, the lender will conduct a credit assessment to evaluate your creditworthiness. They will review your credit history, income stability, and other relevant factors. This process may take a few days, depending on the lender’s internal procedures. 

STEP 6- Review the Loan Approval and Offer

If your application is approved, the lender will send you an offer outlining the terms and conditions of the flexi-personal loan. Carefully go through the offer, including the flexi-personal loan’s interest rate, repayment terms, fees, and any additional conditions. 

STEP 7- Loan Acceptance and Disbursement 

If you agree with the terms and conditions outlined in the loan offer, accept it by signing the agreement and returning it to the lender. Upon acceptance, the loan amount will be disbursed to your designated bank account. 

STEP 8- Access and Manage the Funds

After the loan disbursement, you will receive details about accessing and managing the funds. This may include instructions on how to withdraw money from the credit limit and make repayments. Some lenders provide online banking or mobile app facilities for easy fund management. 

STEP 9- Set a Repayment Schedule

Review the repayment schedule provided by the lender. Understand the due dates and the modes of repayment available to you. Take note of any flexibility in making repayments, such as the option for partial or full prepayments.

To Conclude

Flexi-personal loans have revolutionised the borrowing experience, offering borrowers enhanced control, convenience, and financial flexibility. By providing access to funds within a pre-approved credit limit and allowing multiple withdrawals and repayments, these loans empower individuals to manage their finances more effectively. If you value convenience and want to optimise your loan repayments while keeping costs in check, a flexi-personal loan could be the ideal solution for your financial needs. Remember to explore various lenders, compare terms, and understand the associated fees before choosing the best flexible personal loan option for you.

Amit Arora Finnable

AMIT ARORA

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
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Frequently Asked Questions (FAQs):

Finnable has set a required minimum age for personal loan of 21 years for individuals to be eligible for a personal loan. This ensures that applicants have reached legal adulthood and are capable of entering into a financial agreement.

Yes, Finnable understands the financial needs of young borrowers and offers personalised loan options tailored to their specific requirements. Whether it's financing higher education, purchasing essential items, or starting a business venture, Finnable provides support to young individuals seeking financial assistance.

Borrowers nearing retirement may have unique financial needs, such as retirement planning, medical expenses, or supporting their children's education. Finnable offers personalised loan solutions that consider the specific circumstances of pre-retirement individuals, helping them meet their financial goals.

Unfortunately, no. Finnable does not, at the moment, offer any loans to senior citizens. Currently, 60 is the maximum age for personal loans set by Finnable

Other than personal loan age limits, Finnable considers various other factors for determining loan eligibility. These factors may include the applicant's income, credit score, repayment capacity, and employment stability. By assessing these aspects comprehensively, Finnable ensures that borrowers across different age groups can access the loan products that best suit their financial needs. 

 

Amit Arora

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.
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