EMIs, Tenors and Interest Rates: Everything You Need to Know About Personal Loans

Personal loans are one of the most popular financing solutions available today. What makes a personal loan so attractive is that it is a collateral-free option – you don't have to pledge any security to avail of the money.

You can apply for a personal loan and get the money you need with relative ease. Moreover, lenders offer small- and big-ticket personal loans coupled with flexible tenors, allowing you to draw funds for your needs and repay your dues comfortably through EMIs.

Nonetheless, taking a personal loan comes with the responsibility of paying it back and this means understanding what factors into the cost of borrowing. You must also know about the application procedure and whether the approval time matches your funding requirements.

For a breakdown on these key elements including the application process, EMI, tenor, and interest rate, read our handy guide on everything you need to know about personal loans:

Application process

Applications for a personal loan can be made online – on the lender's website or offline – at your lender's branch. The online mode may be a preferred option as you avoid physical contact and enjoy faster and more convenient processes.

For instance, here is the procedure to get a Bajaj Finserv Personal Loan.

• Apply online and fill up your personal, financial and employment information
• Select the loan amount (principal) and tenor (repayment duration) to get instant approval
• Submit the documents to a representative who will reach out to you
• Get the funds transferred to your bank in 24 hours or less

Bajaj Finserv also offers you an online eligibility calculator for personal loans, to help you apply for funding as per what your current debt-to-income ratio permits. Using it, you can get a glimpse of the personal loan amount you are eligible for instantly.

Documents required and eligibility criteria

In most cases, you need to be employed at a reputed public or private organisation, meet the minimum monthly income criteria, and have a good CIBIL score, ideally 750 or above, to get a personal loan. Any resident Indian between 23 and 55 years of age can get a personal loan from Bajaj Finserv.

To prove your eligibility, here are the documents you must typically submit:

• KYC documents
• Employee ID card
• Salary slips of last 2 months
• Bank account statements of the last 3 months

Interest rate, tenor, and EMI

When you borrow a sum of money (principal), you commit to paying it back over many months (tenor) at a rate of interest. Your dues are spaced out over the length of the tenor equally, and you pay a monthly amount called an Equated Monthly Instalment (EMI).

To see how the principal, tenor and interest rate affect your EMI, use a personal loan calculator. This tool will greatly help you plan for repayment. To make a prudent decision, it is good to note some rules of thumb.

Firstly, your EMI is always proportional to the principal and interest rate. If either of these go up/down, your EMI will change likewise. However, while your EMI reduces as the tenor increases, your net interest payments increase side by side. Hence, it is apt to pick the shortest tenor possible.

Part-prepayments and other charges

While evaluating the cost of borrowing, consider the effect of part-prepayments. When you make one, you pay off a portion of the principal early and this reduces your remaining EMIs. The amount saved is substantial when you are in the early phases of repayment, as here the interest component of EMIs is more.

However, lenders charge you a fee for this facility. While calculating whether a pre-payment can help you save big, make sure you pay attention to this charge. In addition, it is well worth inspecting the other fees and charges associated with your personal loan, as these affect the total cost of the loan. These include processing fees, secure fees, bounce charges, penal interest, and statement charges. Knowing every charge upfront is key to enjoying a default-free repayment journey. Bajaj Finserv promises cost-effective fees and charges and no hidden costs to make your borrowing experience hassle-free.

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Now that you know the various elements of a personal loan, make an informed choice by evaluating your need for finance and reading the fine print. Choose a lender that offers fast disbursal, has simple eligibility criteria that you can easily meet, charges a competitive interest rate on personal loan, is transparent about all related charges, and helps you apply and receive the loan 100% online. It's also important to know of personal loan variants that may help you meet your needs better while making repayment more affordable during a cash crunch.

Once such example is the Flexi Hybrid Personal Loan offered by Bajaj Finserv, which allows you more flexibility by extending credit, from which you can withdraw funds based on your needs, and pay interest only on the amount utilised. By choosing the interest-only EMI facility, you can pay EMIs that are up to 50%* lower for the initial part of the tenor.

With such benefits at your fingertips, get started with a Bajaj Finserv Personal Loan to tackle your financial requirements. Simply check your pre-approved offer for instant approval through a personalized deal!