Personal loans: When you are looking for a personal loan, one of the key considerations is to determine the loan tenure. This has a direct bearing on your EMI. Longer the loan tenure, smaller the EMI and conversely — shorter the tenure, bigger the instalment.
Therefore, at the time of choosing a personal loan, you are recommended to make note of the following.
For ideal loan EMI, make note of these points
I. To make EMI smaller: When your loan EMI is large, you may consider increasing the loan tenure. This will bring down your EMI. Suppose, you are taking a personal loan of ₹5 lakh and rate of interest is 11 percent – your monthly instalment would be ₹23,304. In this scenario – if you want to bring it down, you can increase the tenure of loan – say three years — to bring your EMI lower to ₹16,369.
And if you want to opt for even smaller EMI, you can increase the loan tenure to four or even five years so that your monthly instalment further drops to ₹12,923 or ₹10,871, respectively.
II. To repay faster: Now let us take a contrarian view. Suppose, you are about to take ₹10 lakh loan at 11 percent interest for a four-year period, the monthly instalment will come to around ₹25,846.
If you intend to repay the loan in a shorter time period — say two years – you should be willing to pay a higher monthly instalment i.e, ₹46,608. And if you intend to repay within 18 months, the instalment would further jump to ₹60,634.
III. Premature closure charges: It is worth mentioning here that the bank may impose premature closure charges from the borrower when s/he decides to clear the loan earlier than scheduled.
For instance, if you want to prepay the loan within two years while the actual loan tenure is three years the bank may levy a charge at a percentage of the outstanding loan. This could range between 2 to 4 percent of the outstanding principal amount plus GST.
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