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Flexi Personal Loan Vs. Term Loan: Which One Lowers Your EMIs?

  • Highlights

  • Make unlimited withdrawals from your flexi loan limit

  • Prepay your flexi loan when you can, at no added cost

  • Pay interest only on what you use with flexi loans

  • Bajaj Finserv Flexi Personal Loan lowers your EMIs by up to 45%

Term loans and flexi personal loans help you meet a variety of financial goals like marriage, education, home renovation, vacation, business expenses, and more. However, the two sources of finance differ from each other in terms of their nature, the usage of funds, the interest charged, and the mode of repayment.

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1. Nature of the loan

A term loan is generally extended by a lender for a particular period of time 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, 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 utilize a flexi loan to finance a wide range of needs, be it funding the annual family vacation or managing a big wedding expense.

5 things you can get on EMIs for your wedding

3. Interest charged

Term loans are mostly subject to a fixed rate of interest with interest being charged on the entire loan amount, whether the amount is 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 end up utilizing 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 initial tenor. Regular EMIs with the principal component included resume from the subsequent repayment tenor. You can also pre-pay the principal, either in full or partially, whenever you have excess funds. Such a facility is not available when you avail 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 an annual basis), your annual savings (the yearly savings made on the interest of the loan)

Term Loan – Five Years Flexi Loan – First Year 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 is based on the assumption 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 the 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 further easy to avail finance with money in bank with 1-step verification. With your loan amount already being approved, you only need to avail it without the need to queue for lengthy applications or undergoing a long process of documentation. All you need to do share a few basic details about yourself and know your pre-approved offer.

The content of this document is meant merely for information purposes. The personal loan features mentioned in this article are subject to updation, completion, revision, verification and the same may change materially based on policy revisions. For more details, please visit our Personal Loan terms and conditions page here.

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