Long Term Personal Loans

To satisfy your every need big or small – a personal loan is there for when you want the latest smartphone or need a long-term loan for bigger things like renovating your house, meeting medical expenses, etc.

Personal loans can range from a few thousand rupees to lakhs. The higher you go, the higher will be your EMI. But you can reduce your EMI by spreading it over a number of years. Now, there are pros and cons to making your loan a long one. Let’s take a look.

• If you take a long tenure, say 5 years, then you reduce the EMI you have to pay every month. So, this way you can take a personal loan even if you can afford to pay only a small amount.
• For example, if you take a loan of Rs.2 lakh for 1 year at 14% p.a., your EMI will be Rs.17,957. But if you extend this to 5 years, then you only need to pay Rs.4,654 every month.
• The financial burden is lesser. You can fit the EMI into your monthly budget easily and not worry about a big chunk of your salary going towards the loan.
• Lastly, if you’re not able to meet the income eligibility, asking for a longer tenure might help. You will need to pay a lower EMI and therefore the bank will know you can afford it.

• When you choose a longer term, you must know that you will be paying interest for the same amount of time. So, by choosing a long term, your interest rate might remain the same, but you increase the total cost of your loan.
• Taking the same example, even though you pay Rs. 17,957 every month for 1 year, you only pay Rs. 15,489 in interest to the bank. So, you take Rs.2 lakh and repay Rs. 2,15,489.
• But if you select 5 years, though you pay only Rs. 4,654 per month, the interest cost is Rs. 79,219. So, you take Rs.2 lakh but repay Rs. 2,79,219.
• Do you see how much more interest you have to pay? So, choose this option only if you really can’t afford to pay a high EMI. If you can afford it, it’s best to opt for a short-term loan and save on interest.
• Apart from this, the burden of the loan will be on your shoulders for many years, which might ultimately take a toll on you.

So, before choosing a long tenure, take these points into consideration. There is no rule, it is up to you to decide which would be best for you.