A Flexi Loan, also known as Flexi Personal Loan, allows loan applicants to borrow funds up to a particular limit in the form of overdraft or credit line facility. The lenders charge interest only on the amount used by the borrower and not on the total sanctioned amount under this type of personal loan. Although borrowers can repay the principal amount back to the lender as per their convenience, they have to clear the interest amount at regular intervals according to the lender’s terms and conditions.
Features and Benefits of Flexi Personal Loans
Flexi loans are most suited for applicants who are looking for a personal loan with a relaxed repayment schedule. Some of the main features and benefits of a flexi personal loan are as follows:
- Easy Access to Funds: A flexi loan borrower can withdraw funds at any point of time, as per their requirement, within the credit limit approved by their lender.
- Flexible Repayment: Existing flexi loan borrowers can clear the outstanding principal amount, when they have excess funds, as per their convenience.
- Multiple Withdrawals: Borrowers can take out funds more than once, within an approved credit limit, without paying any additional charges.
- Lower Interest Component: A flexi personal loan gives borrowers the opportunity to save on the interest amount. The lender calculates the interest payable only on the withdrawn amount and until their repayment. The interest component is not charged on the total sanctioned limit. For example, if a borrower has a loan of Rs. 10 Lakhs but takes out only Rs. 5 Lakhs, they will pay the interest only on the withdrawn amount till the repayment of the dues. This helps in reducing the overall interest cost.
- No requirement for Collateral/Security: Availing a flexi personal loan or personal loan overdraft facility does not require the pledging of any collateral or security.
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Interest Rate for Flexi Personal Loan
The interest rate for flexi loans offered by some of the major lenders are as follows:
|Name of the Lender||Rate of Interest (p.a)|
|Bajaj Finserv||11% p.a. onwards||Apply Now|
|ICICI Bank||12% – 14% p.a.||Apply Now|
|MoneyTap||13% p.a. onwards||Apply Now|
|KreditBee||18% p.a. onwards||Apply Now|
Note: Rates as of 9th December 2022
- A flexi loan is available for both salaried employees and self-employed individuals. However, the eligibility criteria for availing this loan can vary across lenders and will depend upon the applicant’s profile. Lenders may consider several factors while assessing the eligibility for a flexi loan including the borrower’s age, income, occupation/business continuity and the existing financial obligations while sanctioning the credit limit for flexi loan or personal overdraft facility.
- The credit score of a loan applicant also affects their eligibility while availing a flexi personal loan. A high credit score, preferably 750 and above, enhances the scope of loan approval for a borrower. It may also improve their chances of getting a flexi loan at lower interest rates. Therefore, loan applicants should always keep an eye on their credit scores before they apply for a loan and look to improve them if they reach below a particular threshold level. Loan applicants who are not aware of their credit scores can check it at Paisabazaar and receive monthly updates on their scores along with credit advisory services at zero cost. Those having low or NIL credit scores can also avail Step Up Credit Card co-branded with SBM Bank India Ltd. to build or improve their credit score.
Documents Required for a Flexi Personal Loan
The documents required for availing a flexi personal loan and a term loan are similar in most cases. Some of the main documents needed to apply for a flexi loan are as follows:
- Identity Proof: PAN Card/Voter ID Card/Aadhaar Card/Passport/Driving License
- Address Proof: Aadhaar Card/Utility Bill (up to 3 months old)/Lease or Property Purchase Agreement/Driving License/Bank Account Statement/Passport
- Income Proof:
- Salaried Individuals – Salary Slips/Bank Account Statement/Form 16
- Self-employed Individuals – Bank Account Statement/P&L Statement and Balance Sheet/ITR of previous years
- Business Proof (for self-employed individuals & professionals): Certificate of Practice/MOA & AOA/GST Registration and Filing Documents/Partnership Deed/Shop Act License
Note: The above list of documents is indicative and lenders may ask for additional documents depending on the individual applicant’s profile.
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Difference between Term Loan and Flexi Loan
|Basis||Term Loan||Flexi Loan|
|Nature||The lender disburses the approved loan amount to the borrower’s account.||The lender sanctions a credit limit to the borrowers, from which they can withdraw as per their requirements.|
|Interest Calculation||The lender charges interest on the outstanding loan amount.||The lender charges interest on the amount used/withdrawn out of the total credit limit sanctioned by the lender, until the repayment of the drawn amount.|
|Prepayment Charges||Most of the lenders levy a prepayment fee on prepaying personal loans availed at fixed rates. No prepayment fee is charged on the prepayment of personal loans availed at floating rates.||No prepayment fee is charged.|
|Repayment schedule||The repayments are usually made in the form of EMIs, consisting of both principal and interest components.||Borrowers are free to repay the principal component as per their financial position, till the tenure of the overdraft facility. However, the lenders may require the borrowers to service their interest component at predetermined intervals.|
Frequently Asked Questions (FAQs)
Q1. Is there a difference between a ‘flexi personal loan’ and a ‘personal line of credit’?
No. Both of the terms, ‘flexi personal loan’ and a ‘personal line of credit,’ usually mean the same and offer the same set of features. In most cases, it’s just a difference in name from one provider to another. However, in some rare cases, a personal line of credit might have an interest-free period which is not usually applicable in case of a flexi personal loan.
Q2. How can I use a flexi loan?
Flexi loans come with flexible end-usage and can be availed to meet any personal financial need.
Q3. How much interest is charged on a flexi loan?
Flexi personal loans are usually offered at lower or sometimes comparative rates similar to regular personal loans. However, the applicable rate of interest depends on multiple factors including your credit score, repayment capacity, type of employment and existing financial liabilities.
Q4. How is interest calculated on a flexi personal loan?
A number of lenders calculate interest rate on a flexi loan on a daily basis, as per the amount utilized by the end of the day. However, this may differ from one lender to another. Moreover, the interest is only calculated on the amount utilised and not on the entire credit limit sanctioned. This is what sets a flexi loan apart from a regular personal loan. This is how it helps you save on the total interest payout.
Q5. How can I repay my flexi personal loan?
You can repay your flexi loan in easy EMIs. In case of flexi loans, you just have to repay the amount that you utilise and not the entire loan amount sanctioned by the lender. In some cases, lenders also offer you an option to pay only interest as your instalment during the initial years of your loan tenure. You can also choose to prepay your flexi loan before the end of its complete tenure without any prepayment penalties.
Q6. Is there a limit to the number of times I can withdraw and make re payments on my flexi loan?
No, there is no limit on the number of times you can withdraw funds from the loan account and make repayments. However, you must ensure that you withdraw an amount within the credit limit sanctioned by your lender.
Q7. Do all banks and NBFCs in India offer flexi personal loans?
No, not all banks and financial institutions in India offer flexi loans. Some top providers of flexi loans in India include Bajaj Finserv, ICICI Bank and MoneyTap. The flexi personal loan offered in each case is slightly different from the other. However, the general idea of the loan remains the same.