What is Personal Loan Tenure?

For a first-time borrower, understanding the nuances of a loan is important. One of the important factors of a loan is the tenure of the loan itself. 

So, what is a personal loan tenure? The loan tenure is the period through which the loan has to be repaid to the lender. The repayment is done through EMIs, which is paid on a fixed date and on a monthly basis. A lender can offer a long-term loan period or a short-term loan period. However, it is finally the decision of the borrower to choose the tenure of the personal loan

A personal loan minimum tenure can be of 6 months, whereas a personal loan maximum tenure can range up to 60 months.

Importance of The Tenure

So why is personal loan tenure important? The loan tenure is calculated in months. Knowing the term of a loan is important as it helps you understand how much EMI you will be required to pay each month. Based on the EMI, borrowers will also be able to calculate their monthly budget during the term of the loan.  

Your tenure for a personal loan can also improve your cibil score. Based on your repayment history, the chances of your cibil score increasing are also high.

Understanding the loan tenure can also help you in calculating the total cost of the loan itself.

Important Factors of Right Personal Loan Tenure

To avail a personal loan, borrowers need to have a constant flow of income that is to be received from their employers. With this income, borrowers can repay the loan in easy EMIs. It also helps them create a repayment plan for the tenure of the loan. 

Lack of income is the main reason of loan rejection. Lenders generally do not give loans to individuals who have a salary less than Rs. 15,000 per month. In some cases, borrowers need to show that they receive a salary of more than Rs. 20,000 per month to be eligible for a personal loan.

EMI

The EMI is the monthly outflow that needs to be paid to the lender. Before availing a loan, it is important to calculate the EMI using a personal loan EMI calculator. If you feel that the EMI is too high or too low, you can adjust the personal loan tenure to suit your financial budget.

Interest Rate

The interest rate is set by the lender. It also influences the loan tenure. Interest rate along with the EMI amount can affect the tenure of the loan. You should use all the permutations and combinations to see how the interest rate affects the EMI and, in turn, your loan tenure.

Loan Amount

The loan amount influences the tenure for a personal loan. If you have availed a instant loan for a larger amount, the tenure too will be long-term. However, if you have availed a loan for a smaller amount, the loan tenure need not be as long.

Age

Your age is an important factor when it comes to choosing a loan tenure. If you are availing a loan in your late 40s, then you will not be able to avail a loan for a longer tenure as most NBFCs have a cut-off age to avail a personal loan.

Short-Term Loan

A short-term loan tenure is for less than 3 years. It can be chosen for a smaller loan amount as there is no real need to spread the EMI over a long period. Choosing to repay a short-term loan over a longer duration would mean that you are blocking your funds to repay a small personal loan. Moreover, by choosing a short-term loan period, you can save your interest outgo on your personal loan.

Long-Term Loan

The loan term for long-term loans is more than 3 years. Ideally, a long-term loan can be availed for a loan of a larger amount. This can help in lowering the EMI and help reduce the burden on your monthly financial budget.

Future Financial Status

Your future financial status also depends on your personal loan tenure. Managing your loan tenure can help in your savings as well as budgeting your finances better.

A short-term loan tenure is for less than 3 years. It can be chosen for a smaller loan amount as there is no real need to spread the EMI over a long period. Choosing to repay a short-term loan over a longer duration would mean that you are blocking your funds to repay a small personal loan. Moreover, by choosing a short-term loan period, you can save your interest outgo on your personal loan.

Conclusion​

When availing a personal loan, you will need to choose the right tenure as your EMI is spread across this time frame. Finnable offers personal loans with a tenure starting at 6 months. Depending on your repayment capabilities, you can also choose a longer tenure of up to 5 years. 

Understanding the tenure over which you need to repay your loan will give you a heads-up and let you plan your finances better. Thus, knowing your loan tenure helps you choose wisely instead of choosing based on impulse.

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