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How Does Loan Tenure Impact Personal Loan Emi?

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By Author: Arjit Chalmela
Total Articles: 15
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Among the loans that lenders give out, one of the most preferred loans is the personal loan. A personal loan is both unsecured and unconditional which gives the borrower a lot of flexibility in terms of using funds. Since the income level and credit score is enough for this type of loan, it is extremely popular. While making a loan application, you can decide the repayment period for your loan between the minimum and maximum limits set by the lender.

A personal loan too is repaid in the form of monthly installments. These installments comprise of the principal repayment as well as the interest payment. It equally divides the principal and the interest amount over the loan tenure and is impacted both by the rate of interest and the loan tenure.

The lender will give you the loan at a fixed rate of interest. However, you can adjust the loan tenure to manage the EMIs. You can find out the impact of the loan tenure on your EMI using a personal loan EMI calculator.

A personal loan EMI calculator will calculate the monthly installment amount for a given principal, rate of interest and loan tenure. Using this personal loan calculator, you can easily find out the impact of the loan tenure on the EMI. Let us examine the impact of two types of loan tenures:

A longer loan tenure:

A longer loan tenure will give you a longer time to repay your loan. If you adjust the loan tenure in the personal loan calculator, you will see that the monthly instalment amount drops. This is because you get more months to repay the principal. However, if you look at the detailed amortization schedule, it will show that the principal outstanding repaid with each instalment will be smaller. The total interest outgo under this option is higher. However, in case you already have existing loans, then you can opt for this so that you can also service these instalments.

A shorter loan tenure:

In case you opt for a shorter loan tenure, the monthly installment amount will be higher since there are fewer months to repay the outstanding principal. However, under this option, the total interest outgo will be lesser than if you choose a longer loan tenure. This is because each installment pays off a larger share of the principal outstanding. You can check the amortization schedule in the personal loan EMI calculator and calculate the total interest paid under both alternatives.

However, you should take the final decision after looking at your monthly income and expenses. Servicing instalments can be a strain on the finances which is why you need to choose the repayment tenure carefully. By using a personal loan calculator, you can figure out the best EMI amount based on your finances.

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