You can avail of a personal loan to fulfill diverse personal and financial obligations, such as paying hospital charges, arranging a big wedding, sponsoring your child’s higher education, etc. You can apply for an NBFC personal loan or approach your bank for this purpose. Multiple banks and Non-Banking Financial Companies (NBFC) offer personal loans against minimal documentation and flexible personal loan tenor, without any collateral. As a result, these loans have become the most sought-after financing option in recent years.
Although it is relatively easy to secure a low interest personal loan these days, you need to carefully choose several loan parameters, like monthly EMI charges, loan amount, rate of interest, personal loan tenor, etc. before applying to a lender.
How To Choose the Right Personal Loan Tenor?
Whether you are borrowing from your bank or applying for an NBFC personal loan, you must follow these 5 steps:
1. Determine Loan Amount
The loan amount you are trying to secure can significantly influence the personal loan tenor. If your loan amount is small, you should try to go for a shorter tenor duration. Conversely, for a larger loan amount, it is ideal to extend your repayment tenor so that your finances are not strained.
2. Compare Interest Rates
Generally, a low interest personal loan will bring low EMI payments and can be paid off within a shorter tenor. Therefore, a high rate of interest will mean high monthly payments that you need to spread out through a considerably longer loan tenor. However, if you have substantial financial securities you can afford to pay off a high interest rate, within a short tenor.
While choosing a tenor for your personal loan, make sure to try out different combinations of EMIs and interest rates, offered by various loan providers. You can use an online personal loan EMI calculator, readily available in the digital marketplaces to find the best suitable low interest personal loan.
Consider your source of income and monthly expenses while selecting the repayment terms. If your monthly expenses account for 70-80% of your monthly earnings, you should go for lower EMI payments. However, this will lengthen your loan tenor. Similarly, if your monthly budget allows you to afford higher EMIs, by all means, choose a shorter tenor. The personal loan EMI calculator will come in handy for this as well.
4. Settle Outstanding Debts
If you have multiple outstanding loans, your credit score will surely get low. This in turn will disqualify your application for a low rate of interest and drag out your loan tenor. Moreover, the liability of the existing loan will affect your monthly budget and compel you to prolong the tenor of your new personal loan for making timely EMI payments. Thus, it is imperative to settle all existing debts and maintain a healthy credit score before applying for an NBFC personal loan or any loan for that matter.
5. Consider Future Increments
If you are certain of a future financial increment, such as a salary raise or a big payment, etc., you can think about selecting a high EMI payment option to repay your personal loan within a shorter tenor.
The leading banks and non-banking institutes offer digital personal loan management along with a personal loan EMI calculator on their official websites. These online tools will enable you to gain clarity on your future repayment options and make an informed decision on your personal loan tenor. Bajaj Finserv provides pre-approved offers on their various products, like personal loans, home loans, credit cards, etc. Check out your eligibility for the same by submitting your name and contact information.