What is the ideal loan period for personal loan that EMI holds within your budget? A checklist | Mint

Personal loans: If you are looking for a personal loan, one of the most important considerations to determine the loan period. It has a direct influence on your EMI. Longer the loan period, smaller the EMI and vice versa – shorter the tenure, greater the installment. Therefore, at the time of choosing a personal loan, you are recommended to take note of the following. Make note of these points I. To make EMI smaller: If your loan EMI is large, you may want to consider increasing the loan period. This will bring you EMI down. Suppose you take a personal loan of £ 5 lakh and the interest rate is 11 percent – your monthly installment is £ 23.304. In this scenario – if you want to bring it down, you can increase the term of the loan – say three years – to bring your EMI lower to £ 16,369. And if you want to choose even smaller EMI, you can increase the loan period to four or even five years, so your monthly installment drops further to £ 12,923 or £ 10.871 respectively. Ii. To repay faster: Let us now take a contrary view. Suppose you are about to take £ 10 Lakh loan at an 11 percent interest for a four-year period. The monthly installment amounts to about £ 25,846. If you are planning to repay the loan in a shorter period – say two years – you must be prepared to pay a higher monthly installment, ie £ 46,608. And if you plan to repay within 18 months, the installment will continue to jump to £ 60,634. Iii. Preliminary closing costs: It is worth mentioning here that the bank can impose premature closing costs of the borrower when he/she decides to make the loan earlier than scheduled. For example, if you want to pay the loan within two years, while the actual loan period is three years, the bank can charge a levy at a percentage of the outstanding loan. It can range between 2 and 4 percent of the outstanding main amount plus GST. Disclaimer: Mint has a fusion with fintechs to provide credit, you must share your information if you apply. These bonds do not affect our editorial content. This article only intends to educate and distribute awareness about credit needs such as loans, credit cards and creditworthiness. Mint does not promote or encourage credit as it has a set of risks such as high interest rates, hidden costs, etc. First published: 28 Apr 2025, 04:34 PM IST