Personal Loans: 7 mistakes that you should avoid for smooth repayment
Also Read: Applying for a personal loan? Here are essential dos and don’ts you must keep in mindMost banks and NBFCs offer personal loans with a tenure ranging from 12 to 60 months. Some of them provide a maximum tenure beyond five years. Accordingly, you should choose a tenure based on which you can opt for an EMI amount you are comfortable paying from your monthly income.Don't make the mistake of opting for a lower tenure to finish the repayment faster.
A lower tenure will result in a higher EMI, which you may or may not be able to pay comfortably. Choosing a higher EMI than what you can afford to pay can disturb your monthly budgeting. It can even increase your debt-to-income ratio (DTI).
The DTI measures the percentage of monthly income going towards paying debt. A higher DTI can put a financial strain on managing your needs, wants, savings and investments.In the earlier section, we saw how opting for a higher EMI than what you can afford can lead to financial strain. At the same time, you should not opt for a longer tenure than required so that it results in a lower EMI.
If you opt for the combination of longer tenure and lower EMI, the loan will go on for longer than it should. It will result in you paying a higher amount in the form of interest.Hence, you should maintain a fine balance between the tenure and the EMI. The sweet spot lies in a tenure that is neither too short or too long.
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