Highlights:
- Flexi Loan gives you the freedom to draw from your approved limit as per your requirement.
- In a term loan, the lender gives the borrower a specified amount of money to be repaid through equal monthly installments, making it easier to plan monthly expenses.
- Choosing between a Flexi Loan vs Term Loan depends on your financial needs and repayment ability.
While making a decision about financial needs, people often ask whether to go for a Flexi Loan or a Term Loan. The two loans can be said to have different purposes and advantages. Knowing how Flexi Loan vs Term Loan vary can help one to pick the right option for their situation.
What is a Flexi Loan?
A flexi loan is a smart way of borrowing funds where you get an approved limit without the hassle of paperwork. The entire process is 100% digital, allowing you to manage everything from anywhere. Also, with a flexi personal loan, you get the freedom to withdraw the funds from your approved limit according to your needs.
For instance, in case your limit is ₹2,00,000 and you take out ₹50,000, you will be charged interest only on ₹50,000. If you repay the amount within 51 days, no interest will be charged. If you need extra time, you can easily change into flexible EMI options of 5, 10, and 20 months.
What is a Term Loan?
A Term Loan is a loan of a definite sum of money that is provided in one go and is to be paid back in equal monthly installments over a predetermined period. The interest rate and repayment plan are decided at the time of granting the loan.
This kind of loan is ideal for the person who requires a particular sum of money for a specific purpose, such as purchasing a car, funding education, or buying a house. The fixed repayment term makes it easy to plan, but it is less flexible than a Flexi Loan.
Key Differences Between Flexi Loan vs Term Loan
| Feature | Flexi Loan | Term Loan |
| Loan Amount | Withdraw as needed within the approved limit | Full amount given at once |
| Interest | Charged only on the used amount | Charged on the total amount |
| Repayment | Flexible, can prepay anytime | Fixed EMIs till the loan ends |
| Ideal For | People with variable expenses | People with one-time needs |
This table clearly shows how the two loans differ in terms of flexibility and usage.
Advantages of a Flexi Loan
The advantages of a flexi loan are as follows:
- Flexible Withdrawals: Borrow only the amount you need.
- Interest Savings: Pay interest only on the amount used.
- Repayment Freedom: Get flexible EMI options.
- Manage Cash Flow: Perfect for people with unplanned expenses.
- Multiple Uses: Can be used for different purposes.
A Flexi Loan gives control over your money and reduces unnecessary interest costs.
Advantages of a Term Loan
The advantages of a term loan are as follows:
- Fixed Loan Amount: Get the exact amount you need upfront.
- Predictable Repayment: Monthly EMIs are fixed and easy to plan.
- No Surprises: Interest and tenure are clear from the beginning.
- One-Time Need: Ideal for specific goals like buying a car or funding education.
- Simple to Manage: Easy for people who prefer structure over flexibility.
A Term Loan provides stability and clarity in repayment, but doesn’t allow changes once sanctioned.
Who Should Choose Which Loan?
- If your expenses are uncertain or occur suddenly, a Flexi Loan is better. It allows you to withdraw the funds according to your needs.
- If you have a specific financial goal with a fixed expense, a Term Loan works best. It provides the full amount upfront with clear EMIs.
Practical Considerations
- While choosing between Flexi Loan vs Term Loan, consider these points:
- Income Pattern: Variable income suits a Flexi Loan. Fixed income suits a Term Loan.
- Financial Planning: A Term Loan helps in planning long-term expenses with fixed EMIs.
- Repayment Capability: A Flexi Loan offers breathing space with interest-only on the withdrawn amount.
- Sudden Needs: For sudden expenses, a Flexi Loan is more convenient.
Conclusion
Flexi Loan and Term Loan, although different in purpose, still have some common grounds is to help you get access to funds. A Flexi Loan, on the one hand, is quite flexible, economical for varied uses, and saves one's interest. On the other hand, a Term Loan provides a definite amount with uniform EMIs and is thereby suitable for one-time financial aims.
The right choice among loans depends on your income, financial aims, and convenience in repayment. Recognizing the distinctions prevents you from getting a loan that is incompatible with your way of living and is also difficult and stressful for you to borrow.
FAQs
1. What is the main difference between a Flexi Loan and a Term Loan?
A Flexi Loan lets you withdraw funds as needed from your approved limit, while a Term Loan gives you a fixed amount in one go with fixed EMIs.
2. Which loan is better for people with unpredictable expenses?
A Flexi Loan is better because you can use funds only when required and pay interest only on the amount you withdraw.
3. Do Flexi Loans help in saving interest?
Yes. Since interest is charged only on the amount you use, Flexi Loans help reduce unnecessary interest payments.
4. Are Term Loans suitable for long-term purchases?
Yes. Term Loans are ideal for planned, one-time needs such as buying a car, funding education, or home-related expenses.
5. Can I change my repayment plan in a Flexi Loan?
Flexi Loans offer flexible EMI options, allowing you to choose a tenure that fits your financial situation.
6. Which loan type is easier for financial planning?
Term Loans are easier to plan because the EMI amount and tenure remain fixed throughout the loan period.
7. How should I decide between a Flexi Loan and a Term Loan?
Choose a Flexi Loan if your expenses are irregular or uncertain. Choose a Term Loan if you need a specific amount upfront with predictable monthly EMIs.
