The period for which you borrow money from lenders/banks is known as the personal loan tenure. Non-banking financial companies, or NBFCs, are also an accepted source of personal loans since they are registered with the Reserve Bank of India. Whether it is an NBFC personal loan or a low-interest personal loan, the tenure must remain the same to avoid penalties in the future.
Your chosen personal loan tenure can depend on many factors. Choosing the period needs careful deliberation, and you must look into the following five aspects before opting for a specific period to repay the personal loan –
Amount of the loan –
Your loan tenure is directly proportionate to the loan amount, and this includes your Debt Burden Ratio (DBR). It is the ratio of your income with the EMI. A rise in the tenure of your loan will reduce the EMI. It reduces your DBR and makes you highly eligible to loan a higher amount from the lender.
EMIs –
The longer the tenure, the lesser the EMI. Therefore, the amount that can be paid as EMI to repay the loan will depend on the borrower’s ability, and you must choose a loan tenure accordingly. A personal loan EMI calculator can come in handy at this point, and you can use it to determine the monthly amount vis-à-vis the period.
Interest rate –
When you increase the loan tenure for lower EMIs, you also need to consider that the interest rate applied to the loan will rise simultaneously. The inverse is true for shorter loan tenures, wherein the consequent EMI will be much higher.
Lenders/banks –
Looking at different lending options is essential. Every institution follows its own set of rules and regulations that borrowers should know about. It determines your eligibility for loans, especially for low-interest personal loans.
Age and income of the borrower –
Lenders make decisions regarding the tenure of the personal loan after checking the age of the borrower. So, a younger borrower can expect a longer tenure as compared to a senior citizen. The source of your income can also matter, wherein lenders can grant you a longer tenure if you earn a steady income.
Personal loans from non-banking financial companies
Banks are known for being strict about their lending policies. In comparison, non-banking financial institutions, or NBFCs, have greater tolerance while approving a personal loan application. NBFCs also enjoy greater control over the interest rates they charge from customers. In sharp contrast, banks strictly follow the RBI policies and guidelines.
Pros of personal loans from NBFCs
When you opt for an NBFC to get a personal loan, the advantages that accrue are –
Less tedious –
Because NBFCs are more accommodating with norms, the approval process for an NBFC personal loan is much faster than that of banks. Banks have an approval process that can stretch up to two weeks. In comparison, NBFCs take a day or a maximum couple of days.
Credit score –
Banks nowadays tend to reject credit scores below 750. On the contrary, NBFCs are more likely to grant you a personal loan even if you have a low credit score.
Personal loan EMI calculator
You can calculate your EMI for the chosen personal loan tenure by using an online EMI calculator. This calculation is based on the repayment tenure, loan amount, and interest rate, and requires you to –
- Input the amount you intend to loan,
- Select the period of your loan, and,
- Opt for the desired rate of interest.
Your EMI is calculated accordingly. Remember that a longer repayment tenure will result in a lower EMI. An online EMI calculator gives an approximate estimate of the EMI you may get from your lender and does not consider service and insurance charges.
Final thoughts
Depending on these factors, you can decide on the loan tenure that is most comfortable for you. Lenders intimate the details of the EMI at the time of approval of the personal loan. Subsequently, every month the amount is debited directly from your bank account.
