India has seen personal loans become a central financial tool that gives quick financial aid to borrowers without requiring any security. These kinds of unsecured loans are designed for all types of financial requirements; they may range from emergencies to planned occasions such as marriages and holidays.
Borrowers who need instant liquidity often choose personal loans because of their flexibility and simplicity in getting them.
Curious to know about the maximum tenure for personal loans offered by banks? This article will tell you more about the different tenures offered for personal loans in India and their strategic significance in financial plans.
It is important to understand how personal loan durations can affect the repayment schedule, interest accruals, or overall financial obligations. These answers will go a long way toward enabling you to make informed choices towards meeting your long-term objectives.
Minimum & maximum loan tenures
At Kotak, the personal loan tenure ranges between 1 to 6 years. However, this duration varies between other financial institutions in India.
Here are some insights:
Minimum tenure
The minimum tenure for personal loans, usually available on a personal loan in India is somewhere between 3 months and 12 months. Those wishing to repay debts quickly and can afford high monthly repayments will find it beneficial to take minimum tenure.
This reduces the time spent being financially committed. Additionally, it also lowers the total amount paid due to interest over the life of the loan.
An exemplary situation for opting for minimum tenure may include financing sudden short-term needs. Or, you can utilise momentary monetary windfalls to manage fast repayments without long-term monetary repercussions.
Maximum tenure
What is the maximum loan duration for the personal loan? The maximum period within which you can take to repay a personal loan could be spread up to seven years. Some providers even allow a tenure of up to eight years under specific conditions. As such, these prolonged repayment periods have made substantial debt management more convenient by slicing payments into small chunks.
As an effect, it reduces the monthly burden, both at an individual level and organisational level. Therefore, people who do not earn much per month or those with other large monetary responsibilities would find smaller monthly outflows helpful.
Differences among lenders
Loan tenures may vary across different lenders/financial institutions, depending on the credit score profile of the borrower. Another aspect that affects the loan tenure is the institutions’ lending policies of the institution.
Researching these variations will allow borrowers to select the most appropriate options as per their monthly budget. A few more factors to consider are the total amount of interest payments and aligning your financial strategies and objectives.
Must Read: Types Of Personal Loans Available In India
Factors influencing loan tenure decisions
Income levels
Your income is vital in deciding the tenure of a personal loan. In terms of repayment duration, a higher income gives you the option to select a shorter tenure. It’s a good decision if you’re capable of paying bigger EMIs without necessarily affecting your standard of living.
However, if your salary is on the lower end, you can prefer long tenures to spread the repayment over more months. This will reduce the burden per month and make it manageable to live on a tight budget.
Borrower’s age
When it comes to tenures, another important determinant of the personal loan eligibility criteria is the applicant’s age. Generally speaking, younger applicants receive longer tenures because they have a relatively longer period before retiring.
A longer employment increases the number of earning years, and thus, payment chances. As retirement nears, lenders sometimes restrict older borrowers because they want loans returned by retirement day - eliminating risk for all parties involved in the deal.
Personal financial goals and responsibilities
You should consider personal financial goals and responsibilities before finalising a loan tenure. Individuals who wish to reduce their interest may prefer shorter tenures.
Alternatively, those expecting big expenses soon might choose longer terms to keep their monthly outgoings minimal. Selecting the most suitable tenure involves balancing such individual financial objectives and ongoing bills or debts, among other existing responsibilities.
Impact of loan tenure on repayments
Calculations on EMI
The loan term directly affects the calculation of Equated Monthly Instalment (EMI). A longer tenure results in lower monthly EMI payments, which makes the loan more affordable on a monthly basis.
On the contrary, shorter tenures raise the monthly EMI but reduce the interest burden over a lifetime because repayment is faster than that of the principal amount. Before you select a loan, use a personal loan EMI calculator to get a clear picture.
Total interest payable
The total interest paid during the duration of your borrowing is inversely related to the chosen tenure. The longer loans, although having smaller EMIs, will attract higher total interest costs throughout.
This happens due to accumulating interest over long periods. Shorter personal loans have a reduced total interest, therefore making them more economical overall.
Examples:
Let us take two hypothetical cases:
Borrower A takes Rs.5,00,000 as a loan at 12% p.a. for 3 years. The monthly EMI would be about Rs. 16,607 with an approximate total interest payable of about Rs.97,858.
Borrower B also chooses this same amount of credit and rate but goes for a term that extends up to 5 years. The monthly EMI decreases by Rs.11,122 while the total interest payable rises to Rs.1,67,333 with time.
From these examples, we can see how different loan tenures affect both our monthly budgets as well as the cost of loans at large. Hence, choose carefully by looking into your financial capability and targets.
Must Read: 5 Things You Should Know About Personal Loans
Choosing the right loan tenure
Assessing personal financial health
Before selecting a loan tenure, thoroughly assess your financial situation. This includes evaluating your monthly income, existing debts, and other financial obligations. Understanding how much can be easily set aside for repayment of loans is crucial while deciding the loan tenure.
Comparing loan offers
Compare various loan offers from different financial institutions. This comparison should go beyond interest rates alone and consider other factors such as personal loan fees & charges, prepayment costs, and flexible tenure options. Many online tools like the personal Loan eligibility calculator can help you make comparisons so that you can see the difference and find the most cost-effective option.
Consultation with financial advisors
Consult with financial advisors before taking a substantial personal loan. These professionals can provide personalised advice based on personal loan FAQs and your unique financial circumstances. They can help weigh the advantages and disadvantages of different loan tenures vis-a-vis long-term financial planning.
Final thoughts
Selecting the appropriate loan tenure is more than just about managing your monthly payments—it’s about aligning these payments with your broader financial health and long-term objectives.
Careful considerations as well as strategic planning are needed to ensure that a chosen loan tenure will improve rather than worsen an individual’s position of financial stability.
Popular Searches on Kotak811
Kotak811 Insights | Super Savings Account | Credit Card Against FD | Apply for Image Debit Card | ActivMoney Savings Account | Apply for Savings Account Online | Savings Account Fees and Charges | Apply for Current Account Online | Kotak 811 | Check Your CIBIL Score | UPI Payments App | Online Dormant Account Activation | Online Zero Balance Account Opening | Apply for Personal Loan
This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
Share
