Term loans and Flexi personal loans help you meet various financial goals like marriage, education, home renovation, vacation, business expenses, and more. However, the two sources of finance differ in nature - the usage of funds, the interest charged, and the mode of repayment.
1. Nature of the loan
A term loan is generally extended by a lender for a period with an agreed-upon repayment schedule subject to a fixed interest rate. Flexi personal loans allow you the flexibility to withdraw the amount you need from your approved loan limit, as many times you want, and as and when a need arises. Here, you can also repay the loan as and when you have extra cash.
2. Purpose of the loan
Term loans are generally business loans meant for small businesses to meet their working capital needs and other similar requirements. On the other hand, you can utilise a Flexi loan to finance a wide range of needs, be it funding the annual family vacation or managing a big wedding expense.
3. Interest charged
Term loans are mainly subject to a fixed rate of interest, with interest being charged on the entire loan amount, whether the amount gets used or not. However, unlike a rigid term loan that offers little room on the interest front, a Flexi loan allows you to pay interest only on what you borrow and not on the total sanctioned limit. This brings down the EMIs, thereby aiding you to manage your finances with ease.
For instance, consider that Rs. 5 lakh has been sanctioned, but you utilise only Rs. 3 lakh of it. In such a scenario, the payable interest will be charged only on the Rs. 3 lakh you’ve borrowed.
4. Option to pay only interest as EMIs
A Flexi hybrid loan allows you to pay only the interest component of the loan as the EMI for the initial tenor. Regular EMIs with the principal component included resumes from the subsequent repayment tenor. You can also pre-pay the principal, either in whole or partially, whenever you have excess funds. Such a facility is not available when you avail of a term loan.
5. EMI amount
EMIs on a term loan are generally much higher than that of Flexi personal loans. Let’s understand how with the help of an illustration.
The below table compares your annual cash outflow (the total amount you pay towards your loan, on a yearly basis), your annual savings (the yearly savings made on the interest of the loan).
| Term loan – five years |
Flexi loan – first ear |
Flexi loan – second year onwards |
|---|---|---|
| EMI: Rs. 23,922 |
EMI: Rs. 5,000 | EMI: Rs. 15,000 |
| Outstanding loan amount: Rs. 7,00,000 | Outstanding loan amount: Rs. 7,00,000 | Outstanding loan amount: Rs. 7,00,000 |
| Rate of interest: 15% | Rate of interest: 15% | Rate of interest: 15% |
| EMI start date: 1st February 2017 | EMI start date: 1st February 2020 | EMI start date: 1st March 2021 |
| EMI end date: 1st March 2022 | EMI end date: 1st May 2021 | EMI end date: 1st May 2024 |
Note: The above illustration assumes that the initial tenor is 12 months and the subsequent tenor is 48 months.
A Bajaj Finserv Flexi Personal Loan can reduce your EMIs by up to 45%, helping you save more.
6. Accessibility
Term loans usually have a rigorous approval process that requires a great deal of documentation. However, a Flexi Personal Loan from Bajaj Finserv offers you instant approval on your loan with money credited to your bank account in 24 hours. 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.
Pre-approved offers on Flexi Personal Loans from Bajaj Finserv make it easy to avail finance with money in the bank with 1-step verification. With your loan amount already being approved, you only need to avail of it without the need to queue for lengthy applications or undergo a long process of documentation. All you need to do is share a few basic details about yourself and know your pre-approved offer.
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