When students or parents plan for higher studies through an education loan, one crucial factor often overlooked is the loan tenure. This single term decides how long you’ll repay the loan, how much interest you’ll pay over time, and how comfortably it fits into your monthly budget. Let’s simplify it..
What is Loan Tenure?
Loan Tenure is the time you get to repay your borrowed money to the bank or lender. For education loans, it usually ranges between 5 to 15 years. A longer tenure means smaller EMIs but more total interest paid, while a shorter tenure means bigger EMIs but lesser total interest.
Let’s Explain Loan Tenure to a 7 Year Old
Imagine you borrow 10 chocolates from your friend. If you return 1 chocolate every day, you’ll be free in 10 days. But if you return only half a chocolate each day, it’ll take you 20 days, and your friend may ask for something extra (interest) for waiting longer. This period of return is the Loan tenure and works the same way!
Why Loan Tenure Matters?
Loan tenure may look like just a number of years, but it directly shapes your monthly payments, total interest, and financial freedom after college.
Monthly Burden: A longer tenure means smaller monthly payments, making repayment easier during the early career years.
Total Cost: A shorter tenure saves money on interest overall, even though monthly payments are higher.
Future Planning: Choosing the right tenure helps you decide how soon you want to be debt-free.
In short, loan tenure is a balancing act between cash flow today and cost tomorrow. Picking wisely can make your education loan easier to manage and your financial journey smoother.
Lets see the EMIs for Different Loan Tenures
Let’s take an example of Riya, who takes an education loan of ₹10,00,000 at 10% annual interest.
If Riya chooses 5 years (short tenure):
Monthly EMI ≈ ₹21,247.
Total repayment ≈ ₹12,74,820.
Interest paid ≈ ₹2,74,820.
If Riya chooses 10 years (long tenure):
Monthly EMI ≈ ₹13,215.
Total repayment ≈ ₹15,85,800.
Interest paid ≈ ₹5,85,800.
Shorter tenure = higher EMI but lower total interest. Longer tenure feels lighter monthly but costs more in the long run.
Decision Making: How to Choose the Right Loan Tenure?
Choosing the right loan tenure is all about balancing comfort today with savings tomorrow. Here are a few points to help you decide wisely.
- Assess your job prospects and expected salary after studies.
- If you can handle higher EMIs early, go for a shorter tenure to save money.
- If you want a low monthly burden, a longer tenure gives breathing space.
- Always align the tenure with your career growth and financial goals.
Key Takeaways
Loan Tenure decides how easily and affordably you repay your education loan. A longer tenure reduces monthly EMI stress but increases total interest, while a shorter tenure saves on interest but needs higher monthly payments. The smart move is to strike a balance—choose a tenure that matches your earning potential, lifestyle, and your desire to become debt-free faster.
Are you parent of a JEE/NEET aspirant?
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