Why Personal Loan interest rates matter more in long-term borrowing

A Loan term is the length of time that a borrower agrees to repay it. This term is about 5 years. It is a crucial factor that determines how much interest you pay over the life of the Loan. An interest rate is the cost of borrowing money or a percentage of the Loan amount. It is essentially the price you pay for the privilege of borrowing.

Interest rates can be fixed and remain the same over the life of the Loan or floating and change in response to market conditions. Most lenders, like SMFG India Credit, offer fixed Personal Loan interest rates. Typically, longer Loan terms are associated with higher interest rates. This is because lenders face more risk with longer terms due to the increased chance of default or early pay-off.

The Loan amount and the repayment period can influence the interest rate. Longer tenures sometimes attract higher rates due to increased risk.

Long-term Personal Loans

Long-term Personal Loans are characterised by extended repayment periods. These Loans offer borrowers the convenience of spreading out their repayments over a longer period, resulting in lower monthly payments than short-term Loans. Here are the key features of long-term Personal Loans:

1. Lower monthly payments: Since long-term Personal Loans have longer repayment periods, borrowers can enjoy lower monthly payments, making them more manageable for individuals on tighter budgets.
2. Higher Loan amounts: Long-term Personal Loans often come with higher maximum Loan amounts compared to short-term ones. This allows borrowers to access larger funds to finance significant expenses, like home renovations or major purchases.
3. Higher interest costs: The Personal Loan interest rates are generally higher for long-term borrowings. While long-term Loans come with lower monthly payments, they accrue higher overall interest costs over the life of the Loan due to the extended repayment period. Borrowers should consider the total cost of borrowing before committing to a long-term Personal Loan.
4. Suitable for major expenses: Long-term Personal Loans are ideal for financing significant expenses that require larger Loan amounts and longer repayment periods, such as home improvements, education expenses, or debt consolidation.

The interest rate on a long-term Personal Loan is determined by several factors, including your credit score and the Loan’s term. Shop around for offers and compare them from multiple lenders to get the best deal. If you have a decent credit score, you can qualify for a lower interest rate. The longer the term, the higher the interest rate.

Conclusion

You can get Personal Loans of up to Rs. 30 lakh at attractive interest rates starting from 13%* per annum. The Personal Loan EMI and eligibility calculators help you plan your finances better by estimating the maximum Loan amount you qualify for and the monthly payments you may expect.