When Should You Look to Increase Your Personal Loan Tenure? – Loans

Personal loans are an excellent tool for individuals who need financial support for various reasons. Whether you need money to pay for your wedding expenses, medical bills, home renovation or debt consolidation, personal loans can help you meet your needs. Personal loans come with a fixed repayment schedule, and you need to pay back the loan amount in equated monthly instalments (EMIs) over a specific tenure.

The tenure of a personal loan ranges from one year to five years, depending on the lender’s terms and conditions. Generally, a longer tenure means lower EMI payments, but it also means a higher total interest payment over the loan’s lifetime. Hence, it is crucial to understand when you should increase your personal loan tenure and how it will affect your finances.

Here are a few situations when you should consider increasing your personal loan tenure:

Reduced Monthly EMI Payments

The primary advantage of increasing the personal loan tenure is that it lowers your monthly EMI payments. For instance, suppose you took a personal loan of Rs 5 lakh for five years at an interest rate of 12%. Your EMI payment would be approximately Rs 11,122 per month. However, if you extend the loan tenure to six years, your EMI payment will reduce to Rs 9,801 per month. This will reduce your financial burden and free up cash flow for other essential expenses.

Job Loss or Reduction in Income

If you have recently lost your job or experienced a significant reduction in your income, it might be challenging to manage your EMI payments. In such cases, you can request your lender to increase your personal loan tenure. By doing so, you can lower your monthly EMI payments, making it easier to manage your finances until you regain your financial stability.

Medical Emergencies

Medical emergencies can be expensive, and it might be challenging to cover the costs through your regular income. In such cases, you can opt for a personal loan to cover your medical expenses. However, if you are already struggling to manage your finances, it might be challenging to pay off the loan within a short tenure. Hence, you can consider increasing your loan tenure to reduce your EMI payments and manage your finances more efficiently.

Debt Consolidation

If you have multiple loans and credit card bills to pay, it might be challenging to manage them all at once. In such cases, you can opt for a personal loan to consolidate your debts. A debt consolidation loan combines all your existing debts into one single loan with a lower interest rate and a more extended tenure. By increasing your personal loan tenure, you can lower your EMI payments and simplify your debt management process.

Cash Flow Management

If you are facing a temporary cash crunch or need extra money for a short period, you can opt for a personal loan to manage your cash flow. However, if you find it challenging to repay the loan within a short tenure, you can increase the loan tenure to lower your monthly EMI payments. This will free up cash flow and help you manage your finances more efficiently until you regain your financial stability.

In conclusion, increasing your personal loan tenure can be a useful tool to manage your finances efficiently. However, you must understand the impact of a longer tenure on your finances, such as a higher total interest payment. Before opting for a longer tenure, you must calculate the total interest payment and ensure that you can afford it. It is essential to assess your financial situation, repayment capacity, and goals before deciding to increase your personal loan tenure. By doing so, you can ensure that you make informed decisions and achieve your financial goals in the long run.

Source- https://articlewipe.com/when-should-you-look-to-increase-your-personal-loan-tenure/