When you’re thinking of funding sudden or big-ticket expenses like travel, medical emergencies, a costly purchase, a wedding, etc., a personal loan is an apt choice. It is unsecured and comes with minimal formalities, which makes quick financing easier.

For such immediate needs, the FIRSTmoney personal loan by IDFC FIRST Bank offers quick disbursal in as little as 10 minutes. Individuals between 21 and 60 years of age with a stable monthly income and a CIBIL score of 710 or above can apply for amounts ranging from ₹50,000 to ₹15 Lakh.

Once the financial needs are dealt with, your end of the responsibility begins. You want this journey to be just as smooth as obtaining the loan. This is where choosing the right tenure matters. Learn which one would work best for you between short-term and long-term in this article.

What is a short-term loan?

A short-term personal loan comes with a shorter tenure, usually within the range of 12-24 months. It is suitable for borrowers who want to clear the loan early.

With this type of tenure, the EMIs are higher, but you save on the total interest outgo as the loan accumulates interest for a shorter period.

With flexible options from lenders like FIRSTmoney personal loans by IDFC FIRST Bank, you can go for a tenure as short as 9 months while enjoying the following benefits:

  • 100% digital application process
  • Zero foreclosure charges
  • Instant disbursal within 10 minutes
  • Flexibility to avail multiple on-demand loans, up to the approved loan offer
  • Zero processing fee for select loan amounts

What is a long-term loan?

A long-term personal loan stretches on for beyond two years and can extend up to five years, which is typically the maximum tenure for personal loans. When you extend the tenure, you are reducing the EMI to comfortably manage them with your other monthly obligations. However, it results in a higher interest outgo.

While long-term options can stretch up to 60 months, FIRSTmoney personal loans offer interest rates starting as low as 9.99% p.a. on a reducing balance basis. This way, you can balance manageable monthly EMIs with a lower cost of borrowing.

How loan tenure affects cost

A simple choice between a short or long tenure has a significant impact on the overall loan cost. Here’s what you can expect based on your choice:

  • Interest accumulation

Interest is calculated across the entire tenure. With a shorter tenure, the interest accumulation is limited. On the other hand, with a longer tenure, the repayment is stretched. Hence, the interest outgo increases even when the EMIs feel manageable.

  • Cost of inefficient management

Stretching repayments can sometimes give you a false sense of affordability. But the interest cost remains high, which can cause you to sometimes miss or delay EMIs. You can better plan with a personal loan EMI calculator to avoid such a blind spot.

Managing interest costs is simpler with the flexibility to make multiple on-demand withdrawals from an approved loan offer. This feature offered by FIRSTmoney personal ensures you pay interest only on the specific amount withdrawn rather than the entire available sum.

  • Prepayment and closure cost

If you wish to close the loan early, you incur a lower percentage of penalty as the accumulated interest is low with a shorter tenure. With a long-term tenure, closing the loan early gets you out of debt earlier.

Borrowers can choose to close their FIRSTmoney personal loan early with zero foreclosure charges through the IDFC FIRST Bank mobile app.

Short-term vs long-term tenure: Which one should you choose?

Selecting between a short or long-term loan is about what better aligns with your monthly budget and the repayment experience you want. Consider these aspects to make the right choice:

  • Monthly comfort

Think about what you can comfortably manage every month without stress. If your financial situation allows, you can demand a higher EMI. On the other hand, longer ones keep your monthly outgo lighter.

  • Income stability

If your income is steady and predictable, you can afford to opt for a shorter tenure. But if your cash flow varies or shifts often, a longer tenure can offer flexibility without the constant pressure. You can see how this plays out with a personal loan EMI calculator.

  • Peace of mind

Getting done with the personal loan early means relief from the loan burden. If you like the idea of that, you can opt for a shorter tenure. Choosing a longer tenure can make your monthly repayments more manageable and provide enhanced flexibility.

  • Future adjustments

With the EMI calculator tool that lenders like FIRSTmoney personal loans by IDFC FIRST Bank offer, you can evaluate scenarios well in advance. You can consider the variables like the loan amount, tenure, and interest to understand which tenure aligns well with your budget today and for the entirety of the repayment period.

  • Existing commitments

Your current EMIs, rent, household expenses, financial goals, or dependents matter. A tenure that seems affordable may soon become restrictive when these responsibilities clash. Accounting for them helps you select a realistic tenure.

Final words

Choosing a loan tenure looks different for everyone because it is about aligning it with your financial situation. Short and long-term repayment periods have their own distinct merits. While one option lets you clear the loan early, the other offers flexibility to manage it comfortably. The trade-off is the interest cost. You can choose what matters to you or aim for a balance. When focusing on the interest costs, you can consider the FIRSTmoney personal loan by IDFC FIRST Bank. It offers competitive interest rates starting from 9.99% for loan amounts up to ₹15 lakh with flexible tenure and zero foreclosure charges.