For the beginners, a tenure is a period within which a loan amount is to be sanctioned. For the new loaners or even the existing ones, it is a general thought that, when a loan is taken in case of emergencies, then it is better to opt for that loan tenure which provides you with the option to payback in less time. Even you must be thinking that it is a wise option, since the loan amount can be paid soon without having to face defaults.
However, that is quite a wrong notion.When you opt for any kind of loan, be it a home loan, car loans etc with a shorter pay out period, you will have to direct a large amount of your earnings towards the payment of your EMIs. That can affect your finances and expenses drastically.
Suppose for example, A takes a loan from the bank of Rs.100000 at the rate of 5% where he can pay the amount in a max of 5 years.So Mr.A will have to pay Rs 60(100000*5/100/60(12*5years) for a period of 5 years. Which is not going to affect his expenses list much.
On the other hand, Mr.B takes a loan of Rs100000 at the rate of 5% where he wants to pay the principle amount in a year. Mr.B will have to pay each EMI at Rs416.66
So this is how, on general, your EMIs will be affected. So do not mistake the fact that Shorter loan tenures might benefit you but can harm your payment structure. Before deciding the loan tenure think wisely.