Personal Loan

Find the Right Personal Loan Tenure that Works for You


Personal loans are unsecured loans. It means you can get one without putting up any security. The funds taken can be used for a variety of purposes. It includes using them for an emergency, funding a business, or pursuing your education.

Personal loans are more expensive than other loan categories. You can choose the maximum loan tenure and an EMI amount based on your repayment capacity. But, this does not imply that you can choose any loan tenure. For example, a longer tenure with lower EMIs or a shorter tenure with a higher EMI amount.

Both cases are not good because they can affect your finances. Your budget will need to include money for repayments if the term is shorter. On the other hand, a longer tenure leads to a greater average cost of borrowing. 

It is crucial to select the right personal loan tenure period. This will ensure that you receive the desired benefits from your loan.

What is a Personal Loan Tenure?

The personal loan tenure, or duration, is the time between its disbursement and your final EMI payment. Let’s say, you took a personal loan in 2017 and paid it off in full in 2022. In this case, the loan term will be five years.

In India, the interest rates on personal loans vary from bank to bank. Most financial firms offer personal loans with a usual minimum loan tenure of two years. And, a typical maximum personal loan tenure is five years. But keep in mind that the length of a personal loan can vary depending on the lender.

Importance of Setting the Right Personal Loan Tenure

It doesn’t only have cost advantages. Choosing the right personal loan tenure allows you to pay your EMIs smoothly. This will make sure your finances are not affected. Other benefits include the following.

  • It assists you in building a positive credit history and a higher credit score. So, it allows you to obtain competitive rates on future loan applications.  
  • It helps you effectively manage your personal finances while also achieving other goals. 

Some Factors to Consider to Choose the Best Personal Loan Tenure

Be aware of your monthly income.

The best way to analyze the ideal personal loan tenure and EMI is to assess your spending and saving habits. Before taking a loan, create a list of your monthly expenses and how much you can save.

Take into account all the liabilities you may have as well as their duration. The amount of your EMI loan and the length of your loan can be chosen based on your savings and spending rates.

The 50/30/20 rule will help you create a repayment strategy that works for you. It states that 50% of your income should go toward meeting fixed and variable expenses. 30% should go toward non-essential expenses. The rest of the 20% should go toward debt repayment and savings. 

Determine how much of a personal loan you need. 

Decide on the amount of the loan you need before applying for one. Your loan tenure directly affects the amount of your loan. To repay the funds and interest on a loan for a larger amount, more time may be required. So, as a general rule, never take a personal loan for a sum greater than what you actually need.

Understand the reasons you require the loan and how much you will need to achieve your goal. It will help you calculate the loan amount needed accurately.

Future Cash Planning.

It is crucial to have an in-depth understanding of your monthly expenses and regular income. It will help you make an informed decision and decide the best personal loan tenure.

When figuring out your monthly expenses, including the amount that you owe, it can be any current loans or debts, including credit card debt. It’s a good idea to look at your debt-to-income (DTI) ratio as well. It is calculated by the formula given below.

Debt-to-income ratio = (Total monthly debt payment / gross monthly income) x 100

It is best to only apply for a personal loan if your DTI is under 50%. 

Calculate Your Interest Rate

A personal loan’s eligibility and interest rate are both influenced by your credit score. Shorter loan terms result in lower interest rates. Longer loan terms lead to higher interest costs that must be paid in the future.

Choose the tenure based on your credit score. If your credit score is high, choose a shorter term. Good credit scores will qualify you for some of the best personal loans with a lower interest rate. This will help you avoid paying more interest. 

You should also choose a longer term if your credit score is low. A shorter term with a higher interest rate will affect your finances. Longer tenure options can also help you raise your credit score. It will benefit future loan applications. 

Use a Personal Loan EMI Calculator

Use the personal loan EMI calculator if you need help deciding the ideal personal loan tenure. You can easily calculate your EMI payments. You can also choose the length of your loan with the aid of a free online tool. Assess the ideal EMI by combining different tenures. 

A personal loan EMI calculator can give you exact information on the total amount of interest paid and the total payment. This includes interest plus the principal that is due over the course of the loan.


Personal loan tenure refers to how long it takes to pay the loan back. The time it takes you to repay the personal loan and the interest rate are directly correlated. So, the longer it takes you to repay the loan, the higher interest you will have to pay. A penalty could apply if you repay a loan early.

It’s important to pick the right loan amount, interest rate, and repayment period when taking a personal loan. If your financial state enables you to select a shorter tenure, go for it and save money on a personal loan. Don’t forget that every penny matters!

For more details, you can visit the Piramal Finance website and explore their products and services.