A Flexi loan is a new variant of a personal and business loan that has become very popular in recent years. With lenders imposing various restrictions on loans, Flexi loans were introduced to bridge the gap that mainstream personal and business loans have created over the years.
Financial emergencies and crises can emerge anytime, and what can be the best example than Covid-19. Therefore, to stand against such vulnerabilities, individuals need financial support with the least limitations. And with its distinctive features, Flexi loans came up intending to provide the borrowers with as much flexibility as possible.
To know about the Flexi loan, keep scrolling the article.
What is Flexi Loan?
A Flexi Loan can be a personal or a business loan that offers you a pre-approved loan amount that you can withdraw whenever you need funds. It is a type of loan for which the lending institution charges interest only on the amount borrowed or withdrawn and not on the entire approved cash limit.
Furthermore, the lenders allow flexible repayments, which means the borrower can make any number of pre-payments of the principal amount during the loan repayment tenure.
Types of Flexi Loan
The lending institutions generally offer two types of Flexi loans, which may vary depending on the lenders. Here are the two Flexi Loan types you must know.
1. Flexi-term Loan
As per Flexi-term Loans, the borrower can easily withdraw or borrow from the approved loan limit in any number of installments, and the interest rate is only charged on the borrowed amount.
The borrower pays the EMI monthly, which includes the interest and a part of the principal amount. Also, the borrowers can repay or pre-pay the entire principal amount or a significant portion of the principal amount before the repayment tenure if they have extra funds. However, the credit line of the borrower will not increase.
For example, Miss A applies for a Flexi-term loan of INR 10 lakh from XYZ Bank bank for a tenure of 5 years. After the loan is approved, Miss A borrows only INR 2 lakh from the approved loan limit.
So now the credit line of Miss A has been reduced to INR 8 lakh. Next month, Miss A decides to pre-pay the remaining borrowed amount along with the EMI (including the interest and a part of the borrowed amount).
But, even though Miss A has pre-paid the borrowed loan amount, the credit line will still be reduced at INR 8 lakh only, which means she can further borrow a maximum of INR 8 lakh only.
2. Flexi Interest-only Loan
In the case of Flexi Interest-only Loan, the borrowers can borrow money in any number of installments from the approved credit line, but the main difference is that they get an option of paying only the interest amount accrued on the total borrowed amount as EMIs.
The borrowers can choose to repay the principal amount at the end of the tenure or pre-pay the amount whenever they have extra funds in hand. Another difference is that the credit line decreases each time the borrower withdraws funds, but it also increases (capped at the approved loan amount) every time they pre-pay the part of the borrowed fund amount.
For example, Miss A applies for a Flexi interest-only loan of INR 10 lakh from XYZ bank for a tenure of 5 years. Similarly to the first scenario, Miss A borrows INR 2 lakh from the approved loan amount after the loan gets approved, and the credit line gets reduced to INR 8 lakh.
Now the next month, she decides to pre-pay the entire borrowed amount of INR 2 lakh along with the EMI (including only the accrued interest amount). So, once she repays INR 2 lakh, her credit line increases from INR 8 lakh back to INR 10 lakh.
Flexi Loan Eligibility Criteria
The borrower must meet the following criteria to apply for a Flexi Loan.
- Applicant must be a resident of India.
- Applicant must be of a minimum age of 22 years and a maximum age of 58 years.
- Applicant must be working in a private sector, public sector, or multinational company.
- Applicant must have at least one year of work experience.
- Applicant must work for the same employer for at least 6 months.
- Applicant’s income must be at least INR 15,000 per month.
Documents Required for Flexi Loans
Find out the documents required to apply for Flexi loans from the list below.
- Application form
- Income proof: Salary slips, Form 16, Bank account statement, Previous years’ ITR, P&L statement, balance sheet
- Business proof (in the case of self-employed individuals): Certificate of practice, GST registration and filing documents, Partnership deed, MOA & AOA, Shop Act license
- KYC documents: Passport, PAN card, Aadhar card, Voter’s ID card, Driving license, Electricity bills, Telephone bills or Water bills, etc.
- Employment proof: Experience certificate
- Any other documents instructed by the lending institution
Flexi Loan Benefits
Here’s why you should apply for Flexi loans.
- Pay interest only for the actual amount borrowed and not the entire approved loan amount.
- Any number of withdrawals is possible for the approved loan amount.
- Funds are available whenever the borrower needs them.
- Flexible repayment terms
- Pre-payment option
If you are an individual having a minimum income, a Flexi loan is a right option for you as you can pay interest only for the amount withdrawn, thus reducing the interest amount you need to pay. You can borrow the amount whenever required, so there won’t be a fund crunch at any point.
Frequently Asked Questions
You can apply for Flexi loans online from the official website or by visiting the nearest branch of the lending institution you have chosen.
The interest charged on Flexi loans varies from lender to lender. However, lenders only charge the interest on the actual amount borrowed and not on the entire approved loan amount.
In a Flexi loan, you get the option to withdraw a certain amount as per your needs and pay interest only for the actual amount approved. However, in a personal loan, the entire loan amount is paid to the borrower for which interest has to be paid.