How to Choose Personal Loan Tenure Wisely?

Updated on: 21 Dec 2023 // 3 min read // Personal Loans
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When you choose a personal loan offer, there are many factors you consider, like loan amount, rate of interest, processing fee, etc. However, it is crucial to focus on choosing the right loan tenure so that you do not end up paying much more than you should. The right personal loan tenure should neither be too short nor too long.

Most lenders offer a personal loan for a maximum tenure of up to 5 years. However, you must take into account whether you will really benefit by taking a loan for such a long tenure. As personal loans often carry a high-interest rate, opting for a long tenure could lead to larger interest payments. 

Here are some useful tips that you must keep in mind when deciding on a personal loan tenure:

Keep a check on your monthly budget and expenses: Your monthly expenses are one of the important factors to consider when deciding on the loan tenure. Just note down your monthly expenses and then deduct the amount from your monthly income. Doing this will give you the remaining amount you need to save for future expenses. Choose a tenure that fits within your budget. 

Current income: If you are earning enough to pay off your personal loan in 2 years comfortably, do not opt for the maximum tenure that you can get for a personal loan (i.e. 5 years). Check with the lender whether you meet their personal loan eligibility for a shorter term. If yes, you can save some significant interest costs. 

Consider future financial possibilities: Whether you are a salaried person or self-employed, there are always some possibilities of salary hikes and business expansion. If you are expecting an increment, bonus, or business profit in the near future, there will be more room to pay higher EMIs. Doing this will enable you to pay your loan in less time and save a hefty interest amount. 

Don’t forget existing liabilities: If you are planning to apply for a personal loan, don’t forget to take your existing liabilities into consideration. All financial obligations are equally important and have to be taken care of parallelly. These financial liabilities could be other loans, credit card bills, house rent, education expenses, and so on. Considering all these obligations will help you choose a tenure and EMI wisely

Calculate the personal loan interest rate & EMI: Another important factor that you must consider when deciding on a loan tenure is the applicable interest rate. Take the help of the Personal Loan EMI Calculator available online to calculate your interest outgo by trying different combinations of interest rates. This will help you decide which tenure is suitable for you as per your budget. The longer the repayment tenure, the higher the interest rate will be. By choosing a short repayment tenure, you can enjoy the benefit of lower interest rates. 

Savings: Do not hesitate to use your savings to lower the personal loan amount. It will help you reduce your interest payment. Let’s say if you want a personal loan of Rs. 5 Lakhs and have a savings of say Rs. 3 Lakhs, you can use Rs. 1 Lakh of your savings and apply for Rs. 4 Lakhs. 

Why Choosing the Right Personal Loan Tenure Important?

  • When you pay your EMIs timely without fail, it improves your credibility. This will result in getting access to competitive interest rates for future loan applications. 
  • It allows lenders to determine your capability of timely loan repayments and you might get an affordable rate of interest too. 
  • Appropriate finance management will be helpful in fulfilling your other financial objectives too.


Choosing the right tenure for personal loan repayment is as important as choosing the right loan amount and interest rate. If feasible, choose a shorter tenure to save on a personal loan interest cost. Remember, every Rupee counts!