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Once you select your personal loan tenure, there are various factors that affect this process. Yes, when it comes to deciding the tenure of your personal loan, there is no denying on the fact that many factors play a crucial role. So, before going any further, let's know more about the personal loan tenure.
What Personal Loan Tenure Stands For?
Personal loan tenure is nothing, but the duration for which you borrow the money from banks/lenders. Moreover, the minimum repayment period is 1 year/12 months, and the maximum is 5 years/60 months given by various banks or lenders. More to the point, when it comes to personal loan tenure, there are many factors that create an effect here.
So, let's discuss these important factors affecting personal loan tenure and have some clarity on them.
Personal Loan Tenure & Loan Amount
If your personal loan tenure increases, your loan borrowing amount also increases. Now, here comes the role of DBR (debt burden ratio) on which the banks put restrictions. DBR is a ratio of your EMIs that you pay to your income as most of the banks don't want your EMIs to be above 40-60% of your monthly income.
Hence, putting this restriction helps you from defaulting on loan because it is not easy to pay an EMI which includes nearly 40% of your monthly income. Furthermore, if your personal loan tenure increases, the amount of your EMI automatically decreases, thus your DBR reduces, and you can easily avail the higher loan amount.
Personal Loan Tenure & EMI
Once you increase your personal loan tenure, your EMI payments will automatically be reduced. If you take the personal loan for a longer tenure, it is quite obvious that your EMI payments will decrease. Whereas, for a short tenure, your personal loan EMI payments will increase. So, it is you who need to decide the tenure of your personal loan because depending on that the amount of your EMIs will be decided. You need take into the consideration your repayment capacity, say how you will manage to pay your EMIs without any hassle. Based on that, you need to decide your tenure as well as EMI as they both play a crucial role in your personal loan journey.
Personal Loan Tenure & Interest Rates
Well, your personal loan tenure does not affect your personal loan interest rates, but the interest payments that you pay directly affect the tenure of your personal loan. Moreover, on your pending amount that you borrowed, banks charge you with the interest on the same. If your tenure increases say for 1 year, you need to pay additional interest on the remaining balance for that additional 1 year.
Personal Loan Tenure & Bank Options
When it comes to DBR for personal loans, different banks have different set of rules for that. Yes, there are times when a bank will not be able to provide the personal loan for less tenure as it increases your EMI payments, which further also increases the DBR. However, if this thing goes above the norms of the bank, you are considered ineligible to apply for loan in that bank.
Now let's discuss about the short and long personal loan tenure in detail to know get the insights of this topic.
Shorter Personal Loan Tenure
In shorter personal loan tenure, the interest that you pay automatically reduces, but your EMI payments will increase. When it comes to higher EMIs, the chances of defaulting on loan also increase. Thus, the shorter tenure will decrease your overall interest payments, but increases your default chances. And, if defaulting starts occurring, you can have a lot of repercussions because your CIBIL score starts affecting, and it becomes difficult for you to avail the loan in the future.
Longer Personal Loan Tenure
In longer personal loan tenure, the payments of your EMIs payments will be reduced, but increases your overall interest payments on number of EMIs. You need to pay more interest on longer personal loan tenures as you have many EMIs to pay. With low EMIs payments every month, you need to pay more interest on longer personal loan tenure. If you are unable to repay the amount in short time, there is no other option left than availing the longer personal loan tenure.
For your reference, here is a list of few banks offering personal loan:
|Bank Name||Interest Rates||Monthly EMI||Tenure||Processing Fee||Min-Max Loan Amount|
|Kotak||11.50% - 20%||Rs. 5,217 - Rs. 6,086||12 - 60 months||Rs.500-2%||Rs.50,000 – 20 Lakh|
|SBI||12.70% - 17.80%||Rs.2550-Rs.9177||48 months||2.02%-3.03%||Up to Rs 10 lakh|
|ICICI||13.49% - 17.5%||Rs. 5,414 - Rs. 5,823||12 -60 months||0.50% - 2.25%||Rs. 20 Lakh|
|HDFC||13.99% - 22.25%||Rs. 5,464 - Rs. 6,328||12- 60 months||1.75%-2.5%||Rs.15 Lakh|
|Bajaj Finserv||15.75% - 16%||Rs. 5,642 - Rs. 5,771||12 - 60 months||2%||Rs.25 Lakh|
How much CIBIL score is required for personal loan:
When it comes to 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 criteria you need to fulfill. Until and unless, you don't have this much of minimum score, it becomes difficult for you to avail the loan hassle-free. It is the basic necessity that you need to have so that banks can further process your loan request and provide you the loan without any worry.
Well, when it comes to paying the EMIs, make sure that you can easily pay your EMIs. So, always make sure to go for the shortest loan amount by keeping the below points in mind:
- You can pay your EMIs comfortably
- Keep sufficient money in store to fulfill the other needs
- Even if you meet with an emergency, you can manage to your EMI