Thinking of taking a 1 lakh personal loan? Understanding these terms helps you to manage your finances effectively. Here, we explain the terms in which a 1 lakh personal loan can be repaid to help you make an informed decision.
What is a 1 Lakh Personal Loan?
A 1 lakh personal loan is an unsecured credit facility wherein you can borrow
Rs. 1 00,000 from a bank or online lender. These loans can be used for whatever you want, like debt consolidation, home improvement or repair, medical bills, and other personal financial needs.
But it’s important to know the repayment terms before taking a loan to ensure they fit your financial status. The article considers the crucial points of repaying a 1 lakh personal loan.
Understand the Interest Rate
Interest rate is the thumb rule to look at when availing of a 1 lakh personal loan. It affects the total amount you will pay back throughout your term, for example. Personal loan rates differ depending on your credit score, income, and lender borrowing policies.
Select the Correct Repayment Tenure
A 1 lakh personal loan can be repaid within 5 to 60 months. The tenure you select will determine your monthly EMIs and the total amount of interest paid throughout the life of a loan. So, a shorter tenure would mean, no doubt, higher monthly payments but reduced total interest costs, and vice versa for the longer term.
Select the tenure length based on your monthly spending plan and what you can pay each month. The key should be to manage your EMIs in a way that minimizes the interest costs of the loan while keeping them manageable.
Prepayment and Foreclosure explanation
Most borrowers want to avoid paying interest, so they are keen on paying the loan early. One must also check the prepayment and foreclosure policies of lenders when planning for a 1 lakh personal loan. Prepayment means that part of your loan is being paid before it ends its tenure, whereas foreclosure refers to paying off your complete outstanding amount before the completion of tenure.
The Credit Impact
Loan repayment on time: The more you repay your 1 lakh personal loan, depending upon the tenure of the application, the better your credit score will be, making it easy to secure loans with low rates. Conversely, if you miss payments or pay late, your credit score can suffer, making borrowing in the future more costly.
Write your finances accordingly, so they affect your credit score positively. If possible, set up automatic payments to never miss a due date. Doing so will keep you from falling behind and damaging your credit.
Conclusion
Before applying for a 1 lakh personal loan, you must understand the repayment terms of this amount to manage your finances and not exceed your budget properly. With the interest rate in mind, loan repayment tenure, and an impact on your credit rating, you can make a calculated decision that suits all of these constraints concerning what precisely you aim for out of financing.
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