How to Choose the Right Loan Tenure for an Instant Personal Loan?

Whether it is a home loan for your first house or a quick personal loan for a smartphone, taking a personal loan is a big decision. Even after making the decision to apply for a loan, you have a few choices to make. Many lenders allow you to choose your loan tenure, giving you the option of creating a customized loan experience. 

The tenure of the loan is the time period for which it is availed. A smaller tenure means that you are paying more each month but you pay off your loan faster. A longer tenure results in less financial burden each month. But, you pay more in interest over time leading to a higher average cost of borrowing.

It is wise to choose a loan tenure period that suits your needs and repayment capacity. To help you make an informed decision, here is our quick guide on choosing a loan tenure. 

Calculate Your Potential EMIs Based on the Loan Amount and Interest Rates

The Equated Monthly Installment or EMI of your loan is the amount you pay each month to the lender. This is a fraction of your loan amount along with interest. The tenure of the loan you choose depends on the amount you borrow as well as the amount of interest the lender is charging for your personal loan

A lower interest rate means lower EMIs, while a higher interest rate leads to a greater monthly instalment. Calculating the loan amount and the EMI that you can afford is crucial as it helps in selecting the loan tenure. 

To calculate the loan amount and the EMI that you can afford, you can use the following formula or use an EMI calculator. 

P x R x (1+R)^N / [(1+R)^N-1]


P = Principal loan amount

N = Loan tenure in months

R = Monthly interest rate

Let’s calculate the EMI for your personal loan for different tenures. For example, if you have taken a personal loan of Rs. 10,000 with a tenure of 6 months at an interest rate of 12% per annum, your monthly payment would be ₹1725.48. Your monthly income should be enough that you can pay ₹1725.48 comfortably plus other expenses like rent, food, etc. 

If you feel you won’t have enough money left in hand to pay off this amount every month, then you can consider a longer loan tenure. For instance, with a loan amount of Rs. 10,000 at 12% interest rate with a loan tenure of 1 year, your monthly payment would be ₹888.49. 

Assess Your Current Monthly Income and Savings 

Your regular income and the monthly budget need to be assessed and compared against the repayment terms. This should be done for both pre-EMI and post-EMI stages to ensure that you will be in stable financial condition. 

Understand your monthly income and expenses by keeping a track of it. Look at your last three months of expenses and income, so that you get a clear picture of the amount that comes in and goes out every month. This will help you decide what EMI you can afford. 

If you would like to go for a shorter loan tenure and be able to pay a higher EMI, you can work to increase your income. You can either make more money from your current job or look for another job with higher salary packages. 

Choose the best tenure for you

Choose a loan tenure that works for you to avoid missing EMIs and incurring hefty penalties. If you have a low credit score and need more time to get your finances in order, choose a longer tenure. If you have the repayment capacity for a short tenure, maybe that’s your best option. 

It is important to understand your unique financial situation to get the most out of your quick loan. When you apply for a personal loan with the CASHe online loan app, we offer flexible tenures from 2 to 18 months so that you can choose one as per your comfort level and budget constraints.

Download the CASHe online loan app today to get started!