Do You Know That Personal Loan Tenure Can Impact Your Repayment Burden
If you are getting innumerable emails and calls on pre-approved Personal Loan offer, do not be surprised! Getting a pre-approved Personal Loan based on salary and credit score is a cake walk today. With little documentation, you can get your Personal Loan amount of 2-5 Lakhs credited to your bank account in no time!
No wonder Personal Financing can help you meet your financial needs. But it only adds an extra burden on your already existing EMIs and repayments if any. Besides, it comes at a higher rate of interest compared to other loans, leading to high monthly repayment outgo through EMIs. So, ask yourself if you really need the finances unless it is an emergency situation. Availing it to meet your holiday expenses or other unwanted expenditure like buying gadgets, jewellery or lavish gifts will only add to your financial burden if you’ve already running EMIs of other loans.
If you are in an utmost need of a Personal Loan to meet a financial emergency, ask yourself these questions first:
How much money do you need?
How much money can you pay as EMI?
What should be the tenure of repayments?
Shorter the duration of repayment, higher is the EMI; higher the duration of repayment, higher goes the total interest paid. Consider all factors involved before you apply for it to avoid yourself from falling into a serious debt trap. Besides, visiting mymoneymantra.com, a one-stop trusted online financial services marketplace that hosts all leading banks and their Personal Loan products for comparison can help you get the affordable deal so that you could take an informed decision.
Why should you keep the repayment period short? A shorter tenure for repayment reduces your interest burden. Though the EMI would be higher compared to EMI for a longer tenure of repayment, you gain a competitive advantage on the total interest paid.
For example, Mr. Jawalkar obtains a Personal Loan of 2 Lakhs today at an interest rate of 14%. If he plans for repayment tenure of 1 year, he will end up paying 17,957 as EMI. Total interest due will be 15,489. Thus for 2 Lakhs, he will pay a total of 2,15,489 by the end of the tenure, which is an extra amount 15,489.
If Mr. Jawalkar plans for repayment tenure of 2 years for his Personal Loan of 2 Lakhs, he will end up paying 9,603 as EMI, which is quite lower compared to the first plan. If he has taken other loans, this EMI amount won’t be a burden for him. But he will end up paying more on the total interest due, which will be 30,462. This is almost double the total interest due on the first plan. Thus for 2 Lakhs, he will pay a total of 2,30,462 by the end of the tenure, which is an extra amount of 30,462.
Also Read: 6 Tips to Manage Your Personal Finance
If Mr. Jawalkar plans for repayment tenure of 3 years, he will pay 6,836 as EMI that will further lessen his EMI burden. But he will end up paying more on the total interest due, which will be 46,079. This is more than double the total interest due on the first plan. Thus for 2 Lakhs, he will pay a total of 2,46,079 by the end of the tenure, which is an extra amount of 46,079.
If you are availing a Personal Loan to meet medical emergencies, it is advisable to buy a Health Insurance policy instead. There are many health insurance products at low premiums. Even if you have to buy a Personal Loan, plan your finances the balanced way and live a stress-free life!
For Lowest Interest Rate Personal Loans, visit mymoneymantra, a leading online lending marketplace that hosts all leading banks and their products. Call our Personal Financing Specialists toll-free at 18001034004 for further information.