Find the Right Personal Loan Tenure for you

Introduction

A personal loan is one that does not require an asset as collateral. It is granted by a financial institution such as a bank in order to allow an individual an additional sum to meet their personal needs. Personal loan eligibility criteria change from one bank to another, however, there are a few constant factors for the same such as income, occupation, age, all of which indicate an individual’s ability to pay back a loan.

Personal Loan Eligibility and Required Documents

There are a number of documents required while applying for a personal loan, such as:

  • Proof of residence
  • Proof of identity
  • PAN Card
  • Past 3 months’ bank statement from a salaried individual and past 6 months’ for someone who is self employed
  • Passport size photographs
  • Proof of office address and office ownership, for those who are self employed

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How to choose the correct personal loan tenure for yourself

Choosing an appropriate Loan Tenure is crucial as it determines the size of your periodic payments and the amount of interest gained on your loan. Short tenure will mean greater periodic payments but less total payment in the long run whereas a longer tenure will be the opposite.

  1. Keep your monthly budget in mind: While choosing a personal loan tenure, keep in mind the current monthly expenditures to maintain your lifestyle. Loans require monthly payments of interest and possibly EMI payments if that is something one has opted for.
  2. Account for Foreseeable expenses: It is important to list your upcoming foreseeable expenses in order to account for the same and the repayment amounts. Then the appropriate personal loan tenure can be chosen so as to keep all the expenses and payments on track without additional stress.
  3. Manage Existing liabilities: Take into account any current commitments that may deter payments for the personal loan such as rent for a home, car payments, a child’s education. By opting for the right personal loan tenure, one can balance the existing commitments with the new ones.
  4. Interest: Keep the rate of interest in mind and check against a combination of different interest rates and tenure to see which one works best for your current lifestyle. The longer the personal loan tenure, the higher the charges.
  5. Use a personal loan EMI calculator: You can map out all the payments using this personal loan emi calculator tool, through an Amortization Schedule showing what needs to be made per month and stay on top of the various expenses so as not to default on the loans.

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Conclusion:

Personal loans have gained popularity through their accessibility. However, financial discipline must be adhered to in order to maintain your credit score and avoid defaulting on any loans. You must be aware of all the details of the loan you are opting for and the options that go with the same.