Flexi Personal Loan: A Guide

A Flexi Loan is a type of credit facility that, instead of giving you a lump sum, lets you borrow from your loan amount as per your requirements. These loans offer greater flexibility and liquidity than traditional loans, making them a unique way to meet your financial needs. Let's explore the nature of flexi personal loans, their benefits, and the broad eligibility criteria to keep in mind when applying for one. Read on to know more!

What is a Flexi Personal Loan?

Unlike traditional loans, a Flexi Personal Loan is a Personal Loan that allows the applicant to use funds within a certain pre-approved amount, as much and as many times as they need to, within a set tenure. Flexi personal loans can be used for unexpected expenses, such as medical emergencies or travel, as well as planned expenditures; there's no end-use restriction.

A regular Personal Loan disburses your approved lump sum upfront, after which you pay it off over the fixed repayment tenure via EMIs. A Flexi Personal Loan will also have a pre-approved loan amount and tenure, but instead of disbursing the entire amount at once, the choice of when and how much to withdraw remains with you. Accordingly, you only pay interest on the amount that you borrow and utilise, and not on the entire sanctioned limit itself.

It's important to note that although you can repay the principal loan amount as per your convenience, you still have to clear the interest amount at regular intervals, according to the lender’s terms and conditions.

Also Read: How to Get an Emergency Loan on Aadhaar Card

Difference Between Flexi Loan and Term Loans

How Does a Flexi Loan Work?

Let's understand how the loan plays out with an example:

Your approved Flexi Personal Loan amount is ₹5 Lakh for 3 years. You have instant access to the entire amount, but begin by withdrawing ₹1 Lakh today to pay off some debts. Your available limit is now ₹4 Lakhs.

You repay ₹50,000 alongside interest. Now your available limit increases to ₹4.5 Lakh, and you're paying interest on the remaining ₹50,000 you still owe. In the meantime, your business needs ₹2 Lakh for inventory. You make the withdrawal; now you owe ₹2.5 Lakh total, and your available limit to withdraw is ₹2.5 Lakh.

This process continues for the full 3 years. Once this facility expires, you can't withdraw any more money unless you reapply for the loan. Think of it like a Personal Loan overdraft facility; you can withdraw funds multiple times within that pre-approved loan limit without needing to reapply or request approvals.

Also Read: Save ₹2 Lakh on Your Personal Loan With These 5 Smart Strategies

Features and Benefits of Flexi Loan

• Staggered amounts: The flexi personal loan gives you the option to draw from it whenever required, unlike standard loans where you receive the entire loan amount upfront.

• Pay interest only on utilised amount: The interest calculation begins only after withdrawing funds from the sanctioned limit, not from the approval date. Interest to be paid is restricted to the amount you borrow and not the total sanctioned limit.

• Repayment structures: Several lenders let you choose between interest-only payments during tenure with principal repayment at the end, or traditional EMI structures that include both principal and interest.

• Prepayment flexibility: Make partial payments to reduce your outstanding loan amount and interest burden, often without prepayment penalties. This reduces the pressure of the principal loan amount, giving you better control over your debt management.

• Suitable for irregular income: The flexibility is particularly beneficial for individuals with fluctuating income patterns or those facing temporary cash flow constraints. It saves you the worry and process of multiple loan applications, especially when anticipating or managing unexpected expenses.

Also Read: Personal Loan for Contract Employees With Salary Slip

Documents Required for a Flexi Personal Loan

Just like a Personal Loan, a flexible personal loan tends to need minimal application. Your PAN card and Aadhaar card as part of KYC would be the basics. Aside from these, some lenders may need additional documentation, like:

• Address proof via utility bills, rental agreements, or property documents

• Income proof comprising salary slips for a specified duration

• Bank statements for a specified duration

Eligibility Criteria for Flexi Personal Loans

While eligibility criteria will vary across lenders, these are broadly the criteria you can expect:

• Indian citizenship

• Between 21 and 60 years of age at the time of application

• Stable employment with an MNC, or public/private company

• A minimum monthly/annual income cut-off to show stable income and repayment capacity

Additional things that can improve your eligibility are a good credit score, a low debt-to-income ratio, and showing regular income deposits in your bank account. Some lenders also extend credit to self-employed individuals.

Also Read: How to Close Personal Loan Early and Save on Interest

How to Apply for a Flexi Personal Loan?

1. Choose a Lender: Make sure you do some research and pick a lender that fits your needs

2. Check Eligibility and Documentation: Check your eligibility on the lender's website and ensure you have the required documents to increase approval chances

3. Fill and Submit Your Application: Add all your details accurately and upload clear copies of your documents

4. Verification and Approval: The lender will verify your application, approve your loan and assign a pre-approved credit limit.

5. Fund Withdrawal: Now that your loan is approved, you can withdraw funds from your available credit limit whenever you need.

To Conclude

Flexi personal loans are ideal for those who require quick and simple lending options alongside the benefit of flexibility. From unpredictable requirements to planned expenses, they help you tackle a range of financial situations.

Ready to explore your Personal Loan options? Contact Poonawalla Fincorp today to discover how our lending solutions can support your financial goals.

Frequently Asked Questions

Can I repay the Flexi Loan before the tenure ends?

Yes, you can make early repayment of flexi loans without significant penalties. Partial prepayments can be made to reduce the outstanding balance and interest burden, while complete closure before tenure may attract minimal processing charges. Ensure you confirm this with your lender and in your loan terms and conditions.

How is the interest calculated on a flexi personal loan?

Interest on a flexi loan is calculated daily on the outstanding balance using the reducing balance method. You pay interest only on the amount withdrawn and not yet repaid, based on the actual number of days the amount remains outstanding. No interest charges apply to unused portions of your sanctioned credit limit.

What happens if I don't use the entire sanctioned limit?

You are not obligated to utilise the complete sanctioned loan amount. Interest charges apply only to the portion you actually withdraw and use, while unused credit remains available for future withdrawals without additional charges. The facility remains active until the expiry date specified in your loan agreement.

Can I increase my credit limit after approval?

Credit limit enhancement is possible based on your repayment track record and improved financial profile. Lenders periodically review accounts and may offer limit increases to customers with good payment history. You can also apply for limit enhancement by providing updated income and financial documents, though approval depends on your current eligibility and the lender's internal policies.

Is there a minimum withdrawal amount for Flexi Personal Loans?

The minimum withdrawal amount for a flexi personal loan depends on the lender, but many of them allow you to withdraw amounts as low as INR 1000.

Do Flexi Personal Loans offer any benefits?

Flexi loans typically offer all the benefits of a regular Personal Loan, including competitive interest rates, minimal processing fees, and flexible repayment options. This is further boosted by the facility to make multiple withdrawals, helping you handle planned as well as unforeseen expenses, and enabling you to prepay the loan amount when you have excess funds.

Are Flexi Loans easier to manage?

Flexi Loans allow for repayment terms that can extend up to 96 months, making them more affordable. That being said, the loan management also comes down to you and your financial behaviour.