How to decide the right personal loan tenure?
With FIRSTmoney, you can get a smart personal loan where you can withdraw only the required sum from your credit line
Unexpected expenses can cause financial stress, especially if these expenses are high and you are not comfortable with utilising your savings to deal with them. In such cases, securing a personal loan might be one of the best ways to deal with the situation at hand without having to deplete your savings. Now, before applying for a personal loan, it is crucial for you to plan your loan repayment so as to not face any financial hassles in the future. This involves picking a suitable loan repayment tenure. Loan repayment tenures directly have an impact on the loan’s monthly instalments, which is why it is so important to pick a tenure that suits your budget.
While choosing the right loan tenure is essential, you might initially be unsure about the loan amount that you require. Applying for a high loan amount just so you do not fall short on funds will still increase the total cost of the loan, and this is where IDFC FIRST Bank’s FIRSTmoney can help! With FIRSTmoney, you can get a smart personal loan where you can withdraw only the required sum from your credit line. You only pay back the sum that you borrow and not the maximum credit limit that you are approved for. This flexible way of borrowing ensures that you can take care of all your expenses with a cost-effective solution with FIRSTmoney’s preferential loan terms.
Understanding a loan tenure and its impact
A loan tenure is the duration over which you commit to repaying the borrowed amount. It plays a pivotal role in determining your monthly EMI (Equated Monthly Instalment) and the overall interest paid. Consider the following example*
Suppose you borrow ?1,00,000 at an interest rate of 10.99%. Here's how different tenures affect your EMI and total repayment:
While choosing the right loan tenure is essential, you might initially be unsure about the loan amount that you require. Applying for a high loan amount just so you do not fall short on funds will still increase the total cost of the loan, and this is where IDFC FIRST Bank’s FIRSTmoney can help! With FIRSTmoney, you can get a smart personal loan where you can withdraw only the required sum from your credit line. You only pay back the sum that you borrow and not the maximum credit limit that you are approved for. This flexible way of borrowing ensures that you can take care of all your expenses with a cost-effective solution with FIRSTmoney’s preferential loan terms.
Understanding a loan tenure and its impact
A loan tenure is the duration over which you commit to repaying the borrowed amount. It plays a pivotal role in determining your monthly EMI (Equated Monthly Instalment) and the overall interest paid. Consider the following example*
Suppose you borrow ?1,00,000 at an interest rate of 10.99%. Here's how different tenures affect your EMI and total repayment:
- Loan tenure: 1 year
- Monthly EMI: ?8,838
- Total repayment: ?1,06,056
- Total interest paid: ?6060
- Loan tenure: 3 years
- Monthly EMI: ?3,273
- Total repayment: ?1,17,828
- Total interest paid: ?17,856
- Loan tenure: 5 years
- Monthly EMI: ?2,174
- Total repayment: ?1,30,440
- Total interest paid: ?30,600
As shown in the above example, it is clear that a shorter tenure reduces the overall interest paid while increasing the monthly EMI payments. On the contrary, a longer tenure decreases the EMI but results in a higher overall interest payout. The key is to strike a balance that aligns with your financial capabilities and goals. Choosing a bank that offers an extended loan tenure can ease your process of finding a suitable tenure based on your financial requirements.
- For illustrative purposes only, actual calculation will be seen on the loan application or agreement
Choosing the right personal loan tenure?
Consider the following factors to determine the optimal tenure for your personal loan:
- Financial stability
Assess your monthly cash flow and stability. Opt for a tenure where the EMI is comfortably manageable, ensuring that you do not compromise on your regular expenses. You can use the FIRSTmoney EMI calculator on the IDFC FIRST Bank website to learn about your monthly instalments before submitting your loan application. Simply enter the desired loan amount, chosen tenure, and interest rate to get a suitable EMI result.
- Loan amount
Higher loan amounts may warrant longer tenures to distribute the repayment burden. Evaluate the balance between a manageable EMI amount and a reasonable repayment period. With IDFC FIRST Bank’s FIRSTmoney, you can obtain a loan amount starting from Rs. 5000 to a maximum credit limit of up to Rs. 10 lakh for your diverse expenses and repay them in customisable repayment tenures that range from 2 months to 60 months.
- Future financial goals
Align the tenure with your future financial aspirations. A shorter tenure may be preferable if you aim for a quicker debt-free status, while a longer tenure might be suitable for those with other long-term financial commitments.
- Interest outgo
While shorter tenures reduce overall interest payments, longer tenures might be acceptable if the interest paid aligns with your financial strategy. Also, choosing a personal loan that offers a lower interest rate can lead to more flexibility in repayments and bring down the overall loan cost. IDFC FIRST Bank offers attractive interest rates on its FIRSTmoney smart personal loans which can be a suitable option for you to manage your loan repayment plan efficiently.
Choosing the right personal loan tenure involves striking a balance between your financial capacity and long-term financial goals. With IDFC FIRST Bank, you have the flexibility to tailor your loan tenure as per your suitability. Evaluate your financial standing, goals, and obligations before finalising your loan tenure. If you are not sure about the loan amount you require, you can always rely on IDFC FIRST Bank’s FIRSTmoney smart personal loan to open a credit line. The FIRSTmoney smart personal loan offers a credit line up to Rs. 10 lakh with preferential terms such as competitive rates, unlimited withdrawals, zero foreclosure charges, flexible EMI dates, as well as a fully digital process which makes getting this loan very convenient. Do note that you can qualify for this loan if you have an exceptional credit score over 750.
