In case of any financial emergency or need of substantial capital funding; personal loans are considered as a great choice. Moreover, there are a lot of options for personal loans available according to different requirements. The availability of a loan with flexible tenure has helped people in getting a loan that suits them the best. You can have a debate on whether you should choose a short tenure loan (one to three years) or a long tenure loan (three to five years). Several NBFCs, digital lenders and banks are offering personal loans ranging from Rs. 10,000 to Rs. 40 lakhs.

Most of the personal loan lenders allow you to choose the tenure according to your ability to repay the loan amount. You can get a personal loan online on the lender’s website. However, you need to be aware of the pros and cons of the long-term personal loan before proceeding.

Is Long Term Personal Loan a Right Choice or Not

Pros of Long-Term Personal Loans

• Reduced burden of monthly repayment: Increasing the tenure of loan repayment can make EMI shorter. It comes handy in case you already have an existing loan, and you have to make monthly instalments for that loan too. You can use a personal loan EMI calculator to calculate how much your monthly EMIs are going to cost you throughout the tenure.
• Improve credit score: Getting a personal loan of long duration is the right way of improving your credit score, especially when it is way below 750. As the EMI is less, you can easily make sure that you make regular monthly repayments. Many on-time repayments would lead to an improvement in the credit score significantly.
• Make you eligible for top-up loans: After completion of a fixed period in your tenure, many lenders and banks offer you a top-up loan facility. Usually, it takes around repayment of 12 EMIs to make an individual eligible for the top-up facility. So, in case you opt for a long-term loan, your chances of being qualified increases significantly.
• Improves eligibility for loans: As the lenders check your monthly income and other eligibility criteria before sanctioning the loan to ensure the credibility of the applicant. Lower EMIs help you get higher loans as it reduces the chances of defaults.
• Allows pre-closing of loan: Opting for longer tenure not only helps in saving on monthly EMIs, but it will enable pre-closure of loans before the end of tenure. Most of the lenders offer pre-close option before the tenure completion date with a minimal fee of around 1% or 2%.

Cons of Long-Term Personal Loans

• Higher rate of interest: Usually, when you opt for a long-term personal loan, you have to pay a higher interest rate. So, a long-term personal loan would lead you to repay a lot more than the amount you have borrowed.
• Be a debt- bearer for longer duration: Another disadvantage of a long-term loan is that you have to remain disciplined with loan repayments for an extended period.
• Decreased eligibility for new loans: The repayment abilities of the applicant define loan eligibility. In case you have an existing loan, applying for a new loan might become more difficult.

Conclusion:

Choosing the right tenure is a crucial decision in any personal loan. So, keep yourself prepared to be able to repay on time every month to keep yourself away from the inconvenience and additional charges. Consider all pros and cons, and use a personal loan EMI calculator before choosing the personal loan tenure.