Personal loan vs Flexi Hybrid Loan: Which One is Best For You?

As per a recent financial report, the personal loan segment registered a growth of 16.9% in January 2020, whereas overall credit growth in India decelerated by 8.5%. Thus, while the latter is contingent on the economic slowdown, the recent data shows how personal loans have been a preferred financial solution for managing expenses during these unprecedented times.

Financial experts attribute the phenomenal numbers in this loan segment largely to the measures adopted by prominent financial institutions in the country. These measures primarily focus on customer convenience and delivering credit facilities in tune with market conditions and consumer preferences. A flexi personal loan is a product of these measures and has considerably improved the market for personal credit in the last few years. 

However, individuals new to credit might not know the difference between a conventional personal loan and a flexi loan. It is crucial to learn of the differences between a Flexi Loan and a simple term loan before securing a credit facility.

A few points of difference between these two credit facilities are discussed below –

• Purpose of credit

Individuals avail a flexi personal loan when there is a host of financial obligations to meet, but not in a single period; instead spread across a tenor. It allows individuals the flexibility to manage their funds as and when they require it.

On the other hand, individuals typically utilise a conventional personal loan if they have a one-time, large monetary requirement. Like, they can require it to manage an emergency or meet expenditures of large ticket size such as debt consolidation or child’s education.

• Nature of credit

A flexi personal loan does not come with any fixed EMIs. Essentially, individuals can withdraw funds from their loan limit as and when the need arises. And the interest is charged only on the amount that has been withdrawn and not the entire limit. That is one of the ways how flexi loans are revolutionising lending in India.

Conversely, financial institutions extend a personal loan accompanied by fixed instalments and amortisation schedule. Therefore, a typical term loan is ideal for individuals who budget their monthly expenses and prefer disciplinary repayment from the onset.

• Interest accrual

In the case of flexi loans, interest only applies to the amount withdrawn and utilised from the entire sanctioned limit. Therefore, both interest accrual and EMI outgo are generally lower in this case.

On the other hand, in the case of a term loan, personal loan interest rates apply to the entire sanctioned amount. Thus, interest accrual, as well as total EMI outgo, is usually higher in this case and pre-determined.

However, repayment of both these loans is done similarly, i.e., through EMIs, with each instalment bearing a principal and an interest component. Also, with lump sum fund availability, borrowers can opt to part-prepay or foreclose the loan account for increased savings.

The benefits from flexi personal loans, nevertheless, outweigh those obtained through personal loans in terms of utility and interest accrual. Some lenders, however, offer Flexi Loan facility as a feature accompanying their personal loans for borrower convenience.

Keeping these points and moving forward when availing a personal loan can simplify the conundrum that borrowers might face in deliberation. Individuals must vet their financial standing and requirements and choose accordingly.

Leading financial companies such as Bajaj Finserv provide pre-approved offers on personal loans that allow borrowers to avail a loan much conveniently and expeditiously. Other financial products are also eligible for these offers, including credit cards and business loans. Individuals can provide their name and mobile number to check their pre-approved offer.

Nonetheless, be it a simple personal loan or a flexi personal loan, borrowing is a significant financial step for individuals. Therefore, individuals must consider all the aspects of these credit facilities cautiously and diligently to develop a well-rounded idea for an appropriate decision.