Personal loans are an excellent choice for borrowers looking forward to quick disbursement of loans with no collateral or end-use restrictions. In most cases, the repayment terms for the personal loan for banks and NBFCs tend to extend up to 5 years. Very rate some lenders offer loan tenure of up to 7 years.
Choosing a long loan tenure is important to get the lowest possible EMI amount. Your decision for the long tenure has a significant impact on your finances. Usually, short-term loan tenure makes you debt-free quickly. But long loan repayment tenure does make more financial sense.
Check out the post to know why you must have longer loan repayment tenure for your loan amount.
Substantial Amount of Loan
Longer tenure for personal loans helps in reducing the monthly repayment amount. And the best part is that you can also borrow a higher amount of loan. The amount of the loan asked for depends on the requirement and affordability of the applicant. One must also consider the debt-to-income ratio while finalizing the amount of the loan.
Ability to Prepay the Loan
Having a longer tenure for the loan might make you worried about the higher cost. Though, if you have enough cash, you can easily repay a considerable amount of your loan.
In most cases, personal loans have a lock-in period, post which you can prepay part of the outstanding amount. Doing so will help you to reduce the loan amount for the rest of the tenure, and you can easily repay the loan through lower EMIs.
Improves Credit Score
Credit score regulatory authorities look after the loan repayment schedule of the borrowers and make further improvements in the score. A personal loan agent suggests that choosing a longer loan repayment tenure helps you choose a lower EMI amount and thus helps you improve your credit score. You can repay or clear the loan amount on time every month. And every time you pay your EMIs on time, you get eligible for a higher loan amount in future.
Manage Other Expenses Easily
When you pay a lower EMI amount every month, you have free-up cash in your hand or account to manage other imminent expenses on the family or personal level. This helps a lot in managing expenses in a better way and increasing monthly savings. Having a better debt management plan is very important.
One needs to understand that personal loans may not be the only obligation. There may be home loans, auto loans, or any other related expenses that should be taken care of every month. Missing out on any of these can result in heavy penalty charges. This way, one may fall into the trap of debt. Again, having a longer loan tenure will help you to have a perfect balance of the payments of debt and expenses.
Easy accessibility of personal loans does help borrowers to sail through urgent monetary requirements with utmost convenience. Though, to make the most of the credit option, borrowers should choose longer loan tenure. Of course, a shorter loan can make one debt-free, but a long loan tenure reduces the EMI burden and the possibility of defaulting on loan EMI payments.