Once you have selected the duration of your loan, different factors affect this process. Yes, when it comes to deciding how long your loan will last, there is no doubt that many factors play a crucial role. So, before going any further, let's know more about personal loan tenure.
What Personal Loan Tenure Stands For?
The personal loan term is nothing, but the term for which you borrow money from banks/lenders. Additionally, the minimum repayment period is 1 year/12 months, and the maximum is 5 years/60 months donated by various banks or lenders. More to the point, when it comes to personal loan tenure, many factors create an effect here.
Therefore, let's discuss these important factors affecting the duration of the personal loan and have some clarity about them.
Personal Loan Tenure & Loan Amount If the duration of your loan increases, so does the amount of your loan. Now, this is the role of DBR (debt burden ratio) that banks put restrictions on. DBR is a ratio of your IMEs that you pay to your income because most banks do not want your IMEs to be above 40-60% of your monthly income. Once you extend the life of your loan, your EMI payments will be automatically reduced. for example, If you take the HDFC personal loan for a longer-term, it is absolutely obvious that your EMI payments will decrease. While your EMI payments on your loans will increase over a short period. So, it is you who must decide on the duration of your loan because the amount of your EMI will be decided. You need to consider your ability to repay, how you will successfully pay your EMI without hassle. On this basis, you have to decide your mandate as well as EMI as they both play a crucial role in your loan travel.
Personal Loan Tenure & Interest Rates Well, the term of your loan does not affect the Personal Loan Interest Rate, but the interest payments you make have a direct impact on the term of your loan. Also, on the amount you borrowed, the banks charge you the interest on that amount. If your term of office is extended by one year, you must pay additional interest on the remaining balance for that additional year.
Shorter Personal Loan Tenure With shorter personal loans, the interest you pay automatically decreases, but your EMI payments will increase. In the case of higher EMI, the likelihood of default on loans also increases. As a result, the shorter term will reduce your overall interest payments but will increase your chances of default. And, if the default begins to happen, you can have a lot of repercussions because your CIBIL score begins to affect, and it becomes difficult for you to take advantage of the loan in the future.
Longer Personal Loan Tenure In the case of a longer personal loan, your EMI payments will be reduced but will increase your global interest payments on the number of EMI. You need to pay more interest in longer-term personal loans than you do many EMIs to pay. With low EMI payouts each month, you need to pay more interest on a longer personal loan period. If you are not able to repay the amount in a short period, there is no other option than to avail yourself of the longer duration of the personal loan.
How much Credit score is required for a personal loan When it comes to a personal loan, before approving the loan amount, the lenders first check your CIBIL score. If you want to have a personal loan, a CIBIL score of 750 or above out of 900 is a criterion you need to fulfil.
Conclusion
Well, when it comes to paying EMI, make sure you can easily pay your EMI. Thus, always be sure to go for the shortest loan amount by keeping the points below in mind:
You can pay your EMIs comfortably
Keep sufficient money in the store to fulfil the other needs
Even if you meet with an emergency, you can manage your EMI
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