Flexi Loan Vs. Personal Loan: Which Is Best for Short-Term Borrowing?
When it comes to short-term loans, AFI offers personal loan solutions to meet immediate financial needs. However, understanding the differences between each can help you make the right choice. In this article, we will delve into the key differences between flexi loans and instant personal loan, their respective benefits, and which one may be more suitable for your short-term borrowing needs.
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What is a Flexi Loan?
A Flexi Loan is a type of loan facility that allows borrowers to withdraw funds as and when needed from a pre-approved loan limit. It functions similarly to a credit line, where you are approved for a certain amount but only pay interest on the amount you withdraw.
The features of Flexi Loans include:
1. Pre-approved loan limit:
The borrower has access up to a maximum limit as and when needed; however, interest is paid only on the amount withdrawn.
2. Flexible withdrawals:
You can withdraw funds several times, provided your loan limit does not exceed the amount of withdrawal.
3. Interest saving:
Unlike an orthodox loan, where interest is charged on the entire loan from date of disbursement, Flexi Loans charge interest only for an amount drawn upon.
4. Flexible payments:
With most lenders, you are free to make payments for any amount toward the principal at any time, and this reduces your burden of interest.
What is a Personal Loan?
A Personal Loan, on the other hand, is a fixed-sum loan that you receive as a lump sum. These loans come with fixed repayment schedules, typically monthly, and are repaid over a defined period (usually ranging from 12 months to 60 months).
Key features of personal loans include:
1. Fixed loan amount:
You receive the full loan amount upfront, repaying it over a defined tenure.
2. Fixed Interest Rate:
Most personal loans carry a fixed rate of interest. That means the amount you are charged as monthly pay remains the same during your loan tenure.
3. No collateral is needed:
Personal loans are generally not secured; hence no collateral is required to receive access to them.
Flexi Loans Pros and Cons
Pros:
• Only interest is charged on the amount used.
• You have a flexible repayment schedule.
• You can withdraw several times against your loan limit
• Best suited when you have fluctuating financial needs
Cons:
• More about the interest rates in comparison with personal loans.
• Some lenders charge a fee for keeping the line of credit open.
Pros and Cons of Personal Loans
Pros:
• Fixed interest rates and repayment terms.
• No collateral required.
• Easier to budget for due to predictable monthly payments.
Cons:
• Interest is charged on the full loan amount from the start.
• No flexibility in withdrawing additional funds after disbursal.
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Flexi Loan vs. Personal Loan: Which Is Better for Short Term Loan?
When deciding between a Flexi Loan and a Personal Loan for short-term borrowing, some factors need to be considered:
1. Loan Amount Needed
If you're not sure how much you want or if you believe your financial needs will change, a Flexi Loan may be the best for you. You can access as little and as often as you need, which might be of help since you avoid going into extra debt by taking more than you need. On the other hand, using a Personal Loan, you're going to receive the full amount of money all at one time, often more than you require.
2. Interest Cost
For borrowers who minimize interest costs, Flexi Loans will be cheaper for short-term borrowing. Since interest is charged only on the money withdrawn, a borrower can control interest costs by drawing less than needed and repaying the loan in a shorter period. And in comparison, a Personal Loan commits you to interest charges based on the full loan amount for the tenure, irrespective of when repayment takes place.
3. Repayment flexibility
Perfect for if one expects extra funds for additional repayments or receives irregular income. It will facilitate bigger repayments when one can afford it and redraw at some point in time if needed; Instant Personal Loans, with their fixed repayment schedule, do not offer this flexibility.
4. Tenure Consideration
For shorter period loans, loan tenure can save on the overall amount paid in the way of interest. With Flexi Loans, you can control the amount of time for which you borrow as you pay back early whenever you have some excess cash. Personal Loans, on the other hand, are locked into a specific repayment schedule and may stand way beyond your short-term borrowing needs.
5. Purpose of Loan
Now, consider why you want to take a loan. If you are looking to cover an expense that you incur only one time you can mention emergency treatment or home renovation, for instance then a personal loan might be your most convenient option. However, if you expect your financial situation to change in the foreseeable future-say, covering cash gaps in your business-a Flexi loan might better fit your requirement.
Flexi Loan and personal loans would be short-term borrowings between them as per your financial condition and the need to borrow. If you think you need flexibility in borrowing just as in repayments, and your financial requirements will change soon, then a Flexi Loan is the right choice for you. But if you want a fixed repayment schedule and money for just one expense, the personal loan is quite appropriate.
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