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

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.

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.

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)

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.