Does a Flexi Personal Loan lower your EMIs or a term loan

1. Nature of the loan

Term Loan: A term loan is a traditional lending product where the lender extends a fixed amount of money for a predetermined period with an agreed-upon repayment schedule, typically subject to a fixed interest rate. Once you receive the full loan amount, you start paying EMIs immediately regardless of whether you use all the money or not.
 

Flexi Personal Loan: Flexi personal loans offer you incredible flexibility to withdraw only the amount you actually need from your approved loan limit, as many times as you want, and exactly when the need arises. This means you have a credit line available, but you only pay interest on what you actually withdraw and use.
 

Why this matters: With a Flexi loan, you can also part-prepay the borrowed amount without extra charges, as and when you have surplus cash available, giving you complete control over your debt management strategy. This flexibility is especially valuable for people with irregular income or those who want to optimise their interest costs.
 

2. Purpose of the loan

Term Loans: Term loans are traditionally goal-focused financial products, generally meant for people to meet their specific financial needs where your expenses are known and there is clarity on how much to borrow.
 

Flexi Personal Loans: You can utilise a Flexi loan to finance an incredibly wide range of personal needs and goals - oftern multiple. Whether it's funding your annual family vacation to exotic destinations, managing big wedding expenses, covering medical emergencies, home renovations, higher education costs, or any other personal financial requirement – Flexi loans offer complete freedom of usage.
 

Flexibility advantage: Flexi personal loans don't restrict you to specific purposes, making them ideal for diverse personal financial needs that may arise over time. You can use the same loan facility for multiple different purposes as your needs evolve.

Term Loans: Term loans are typically subject to a fixed rate of interest, with interest being charged on the entire loan amount from day one, whether you actually use the complete amount or not. This means you pay interest on money that might be sitting unused in your account.
 

Flexi Personal Loans: Unlike a rigid term loan that offers little room for optimisation on the interest front, a Flexi loan allows you to pay interest only on what you actually withdraw, not on the total sanctioned limit. This revolutionary approach brings down your EMIs significantly, thereby helping you manage your finances with much greater ease and efficiency.
 

Real-world example: Consider that Rs. 5 lakh has been sanctioned as your Flexi loan limit, but you withdraw only Rs. 3 lakh of it for your immediate needs. In such a scenario, the payable interest will be charged only on the Rs. 3 lakh you've actually withdrawn, not on the full Rs. 5 lakh limit. This can result in substantial savings over time.
 

Smart savings: This pay-for-what-you-use model can save you thousands of rupees in unnecessary interest charges, especially when you don't need the full sanctioned amount immediately.

Term Loans: Traditional term loans require you to pay both principal and interest components from the very first EMI. There's no flexibility to modify this structure, and you must stick to the predetermined repayment schedule throughout the loan tenure.
 

Flexi Hybrid Term Loans: A Flexi Hybrid Term Loan offers you the unique option to pay only the interest component of the loan as your EMI during the initial tenure period. This dramatically reduces your monthly outgoing during the initial tenure, providing breathing room in your budget.
 

How it works:

• Initial period: Pay only interest as EMI
• Later period: Regular EMIs with principal component and interest component
• Prepayment flexibility: You can prepay the principal amount, either wholly or partially, whenever you have excess funds available
• No penalties: Part-prepayments come without additional charges
   

This facility provides tremendous flexibility for people who expect their income to increase in the future, those going through temporary financial constraints, or anyone who wants to optimise their cash flow management.

Let us understand the difference between EMI amounts of a Term Loan vs. Flexi Hybrid Term Loan with an example.

Loan amount: Rs. 7 lakh

Interest rate: 15% p.a.

Tenure for Term Loan: 60 months

Tenure for Flexi Hybrid Term Loan: 12 months initial tenure, 48 months subsequent tenure.

Use the EMI Calculator available to know your EMIs, tenure, and interest rate before you avail of a personal loan.

You can apply for a personal loan online in a couple of minutes by furnishing just a few documents for your personal loan to be approved.