Nowadays, taking a personal loan has become very common to meet the various requirements of life. There are many attractive schemes offered by various lenders in the market. But when a person applies for it, the only confusion is either to choose a longer tenure with low EMI or shorter tenure with high monthly installments.
There are a few banks that offer repayment tenure of 7 years for people who cannot pay high monthly installments on big loan amount. Therefore, a person needs to understand the various features of personal loan and their implications on the amount paid in order to arrive at a right decision.
- Longer repayment tenure will result in higher interest rates paid for that loan.
- Rate of interest offered for shorter tenure is low as compared to long term loans.
- It is the tenure of the loan that determines the monthly installments with the rate of interest included in the calculation.
Importance of Repayment Tenure
The tenure of the loan is one of the important factors that determine the actual amount that is paid at the completion of the loan. This also determines the interest rates that are offered to you for that particular deal.
Generally, lenders charge low interest rates for short term loans and vice versa. Therefore, tenure of the loan decides the total amount to be paid back and directly effects the monthly installments that are being charged.
Before deciding the short tenure of the loan, one should keep in mind the capability to handle high monthly installments. If you are unable to pay the high EMI on time, then there are various penalty charges that you will have to pay which will increase the burden further.