Understanding the Different Loan Tenure Options
Loan tenure is one of the basic aspects that every borrower should consider before choosing their lender and loan type. Loan tenure is the total loan time in which you need to pay your debts/EMI. The loan tenure may vary from one lender to another whether you are borrowing a short-term personal loan or a long-term business/equity loan. Some lenders or financial organizations provide a loan tenure of 3 years while some provide a minimum loan tenure of 5 years which stretches up to 30 years. It also depends on the time and the value of your loan. You should check the lender’s policy and terms and your financial organization’s profile.
The loan tenure length directly affects the EMI (Equity Monthly Installment). If you choose a longer tenure, your rate of interest will become lower and it will rise in case of shorter tenure. Some people choose a shorter tenure while some opt for a longer one as per their choice and budget.
Know About Loan Tenure for Secured and Unsecured Loans
A loan tenure is the duration for which you have borrowed your loan. It is usually provided in months and years. When choosing a particular loan like a short-term personal loan, long-term business loan or car loan, you should agree to repay your EMI on time during the loan tenure as per the interest rates fixed by your lender.
The tenure selection acts as a balancing factor between your budget and the interest rate to be paid in a specified period of loan. The loan tenure is based on several factors like rate of interest, monthly income, employment, and age. The loan tenure-related terms should be understood very clearly before taking the loan from a validated lender as it will help you analyze which loan tenure is good for your financial health or which is not. You should explore both short and long-term goals for your loan type as it will help you determine which one fits your deal.
Benefits of Choosing the Right Tenure
For handling money very carefully and wisely, choosing the perfect loan term is very necessary as it restricts and prevents you from making any mistake related to financial management. There are various benefits of choosing the right loan tenure and some of them are mentioned here:
- Choosing the genuine and right rate loan tenure helps the borrower to save on the rate of interest on their specified loan value. If you have selected a longer loan tenure, you have to pay a higher tenure and in a shorter tenure, the interest rate will be very low. In this way, if you choose a shorter tenure, you can easily save lots of money on interest rates.
- A good loan tenure will help you know how much you need to pay every month without having financial stress.
- A better choice of loan tenure will help you enhance your credit score. With this, you can easily pay your instalment or debt on time and these habits will help you build your credit score.
- Loan tenure if chosen wisely helps the borrower to achieve their goals on time very conveniently.
Understanding About Various Types of Loan Terms
There are two forms of loan tenure: longer and shorter and it varies from one lender to another and the budget of the borrower.
Maximum Tenure of the Loan: A maximum loan tenure enables the borrower to repay their EMI with an extended limit prescribed by the lender as per the selection made by the borrower at the time of purchasing a loan. On average, the maximum tenure for a loan provided by banks and financial institutions is 15 to 20 years. However, it differs from one lender to another as some provide a maximum loan tenure of about 30 to 35 years.
Minimum Loan Tenure: Typically, the minimum loan tenure is about 3 months in short-term personal loans or other short-term loans. You can contact your banker from which you have connected to get the complete information related to loan tenure.
On one hand, where some financial institution offers 3-month tenure on their loans, on the other some lenders have fixed their loan tenure and the minimum loan tenure ranges from 12 months to 3 years.
If you choose shorter loan terms, then it will be best for you as it helps you repay your loans very easily with a low rate of interest.
Summary
There are two forms of loan terms: short and long. The tenure differs from one financial organization to another. Some provide minimum and maximum limits of 12 months to 15 years while some lenders provide a minimum tenure of 3 months to 10 years. However, a shorter tenure has low-interest EMI and a longer tenure has high interest rates. So, it becomes very necessary for the borrower to check for the loan tenure first and the term of the loan,
