EMIs and the total interest payable depend on how long your personal loan is to be repaid. A longer duration would result in lower EMIs, while a shorter tenure would result in higher EMI payments. If you choose a longer term, you will also end up paying more interest over the loan tenure. Hence, it's important to pick the right loan tenure that best suits your requirements.
Here are a few tips to follow while choosing the right tenure for your personal loan:
Understand your monthly budget
Budget is the most important element for selecting an appropriate tenure on your personal loan. Make a list of your monthly expenses and compare them to your monthly income to determine your idle funds. Taking this calculation as a base will give you a reasonable estimate of the term that fits well within your budget and does not put you under financial stress each month.
Analyse your future financial prospects
If you are a salaried person, waiting for a hike shortly, then you have more flexibility in your income to pay a higher EMI. This way, you are not only paying off the loan early but also reducing the overall interest paid on the loan. This may add an extra burden until you get a hike but will have a positive impact in the overall interest you pay.
Check existing liabilities
From credit card payments, and house rent to tuition fees – always consider your existing liabilities before choosing tenure for your personal loan. Choose a suitable tenure that helps you balance all your expenses without any hassle.
Use our EMI calculator
A personal loan EMI calculator can help you select the tenure that best suits your monthly budget. For example, if you have taken a loan of Rs. 1 lakh with 12 months tenure at an interest rate of 11% p.a., you will be required to pay an EMI of Rs. 8,838. If you want to reduce the EMI amount, you will have to extend the tenure, and such calculations can be done simply using our personal loan EMI calculator.