There is no doubt that personal loans are a convenient option to borrow funds since they are unsecured, but the presence of relatively high interest rate of SBI personal loan and shorter loan tenor v/s some other lending options makes them an expensive source of funds. So, the borrower is burdened as soon as the loan amount is disbursed and has to start repayment in the form of EMIs on the full amount in the immediately following month post disbursal.
However, nowadays, borrowers have better personal loan options like SBI PAPL and ‘Flexi personal loan’. The latter is a category of personal loans which offers multiple benefits and convenient payment options for a customer.
For those who don’t know, Flexi personal loans are basically an overdraft facility offered by lenders whereby a pre-approved cash limit is provided to the select customers, and they can withdraw the amount as and when required. The SBI personal loan interest rate in India is charged only on the amount utilized (and not the full amount) and on a reducing balance basis, thereby reducing the interest burden to a great extent.
It also provides an option to only pay the interest component as EMI and pay the entire or total principal amount at the end of the tenor. It allows withdrawal and deposit of money in the loan account as per the customer’s convenience and thus provides greater control over your funds.
Although personal loans are provided by almost all lenders, a Flexi loan is not provided by many lenders. Usually, lenders provide Flexi loans only to their loyal and trusted customers as it’s an overdraft facility that cannot be provided to every customer.
Unlike a typical personal loan or a pre-approved one like SBI PAPL, where you are given the lump-sum fixed amount by the lender once the loan gets approved, and you need to start paying the EMIs on the full amount, Flexi loans involve a preset credit limit or credit line, granted to you by the lender, which is used as per your needs and you can borrow again, provided you have performed satisfactorily in the current tenure.
When you need additional funds, a Flexi loan allows you to even increase your limit or borrow again without the need for a fresh loan application, unlike a regular personal loan.
Why choose Flexi personal loans?
- No prepayment charges-You can prepay your loan flexibly as and when you have surplus funds, with no extra cost.
- Minimal or no documentation is required generally for most lenders.
- The interest component applicable as per the SBI personal loan interest rate needs to be paid only on the amount utilized and is calculated regularly and payable each month which means a reducing balance in the long term, leading to greater savings as compared to a term loan.
- Low renewal fees in case you wish to borrow again within the loan tenure.
- Option of conversion to a term loan anytime during tenure.
- No limit on the total no. of withdrawals & deposits.
- Option to convert to payment of just the interest component as EMIs and pay the principal at the end of tenure, resulting in lesser burden during loan tenure and also savings through lower EMIs.
Still not very clear? Read this.
You took a personal loan of Rs.10 lakhs and utilized Rs.5 lakhs, tenure 5 years and interest @15%.
In the case of a regular personal loan, your EMIs would be Rs.23,790, leading to an annual outflow of Rs.285,480. But when you take a Flexi loan, this EMI gets reduced to Rs.13,550, and annual outflow comes down to Rs.16,2600.
Hence a Flexi loan saved you Rs.122880 annually as it was calculated on the utilized amount (Rs.5 lakhs) and not the full loan amount. And, if you further opted for an EMI as interest component only, your savings would be further reduced- Rs.7 500 EMI, Rs.90 000 Annual Cash Outflow, hence Rs.195 480 as annual savings.
Thus, Flexi loans are a great option to avail in order to obtain various benefits and enjoy a substantial amount of savings as compared to a term loan. The absence of rigidity and presence of flexibility, along with various other advantages, make a Flexi loan a favourable option for every customer.
Quick tips to keep in mind & consider when taking SBI PAPL
While servicing the pre-approved personal loan of SBI, make sure you make it a habit to pay the EMIs timely. Disciplined and regular repayments of your EMIs and credit card bills reflect positively in your credit report, thereby enabling you to build as well as maintain a strong credit score. The presence of a good credit score may assist in fetching a lower SBI personal loan interest rate, along with better credit cards that offer higher benefits.
But on the flip side, any kind of delay in repayment is capable of pulling down your credit score, which would also hamper your future loan eligibility and loan approval chances, apart from the imposition of applicable penalties and fines. Moreover, missing debt repayments successively may result in lenders blacklisting you, and they may even label you as a defaulter.
Remember, taking an SBI PAPL affects your present plus near future financial position, typically until its repayment gets finished. And since personal loans are a common option opted by many borrowers, especially the pre-approved ones that are targeted at specific audience having good income and repayment history, it becomes even more important to not get carried away by lucrative features like no boundation on loan’s end usage, extremely quick disbursal, no need for pledging collateral or providing any security or margin.
Even when availing or applying for the loan at the offered SBI personal loan interest rate, you can easily avail most of the information regarding the personal loan application online on the lender’s website. And do not fail to pay attention to the not so declared minute details while applying or availing your SBI PAPL, as this can lead to money problems once you have taken the loan and have to start its repayment, along with associated fees/charges payment.
Also read: Why & How to Refinance Home Mortgage?