As per a report, in the FY21, leading financial lenders have disbursed substantial loan amounts of nearly Rs.9.5 trillion to MSMEs, which is approximately 40% higher than last year.
While availing of loans, borrowers need to take care of the EMIs and ensure that it does not hamper their entire repayment structure. Therefore, if borrowers are willing to expand their business by availing a loan, they must know specific ways to reduce the EMIs. One of the effective ways is to compute monthly instalments using a business loan EMI calculator available on lenders’ websites.
6 ways to reduce business loan EMI
Since a loan is taken to meet an urgent financial crisis, borrowers must consider the interest rates levied on the amount. A higher interest rate can significantly increase the borrowing cost. It is because if the interest rates are higher, the EMI amount will also be high.
Besides using a business loan, the EMI calculator estimates the monthly payment, there are a few tips or ways which will allow borrowers to save a substantial amount on their EMI.
Opting for an extended repayment tenor
Since the loan repayment tenor is inversely proportional to the EMI, borrowers must choose the tenor carefully. When a borrower chooses a longer tenor, the EMI payable gets reduced. However, borrowers must note that opting for a longer tenor while availing of a business loan will result in higher interest outgo.
Therefore, one should consider all the pros and cons before choosing an extended tenor. In such cases, borrowers can take the help of a term loan calculator, which will allow them to calculate EMIs beforehand.
Part-prepayment is a facility that allows existing borrowers to reduce the EMIs. With this part-prepayment advantage, borrowers can save substantial interest payable on their loan amount. Choosing to prepay will not only bring down the principal amount but also the repayment tenor resulting in a lower interest payable. In such cases, borrowers can use a business loan EMI calculator to evaluate the EMI on their repayment.
Maintaining a CIBIL score or credit report is essential before availing any loan. Since CIBIL score is one of the primary determinants for the lenders before approving a loan amount. Individuals should try to keep a score of 750 to ensure a quick loan approval.
With a CIBIL score, lender assesses the repayment capacity of a borrower and sanctions the loan amount accordingly. So if a borrower possesses a high credit score. Then he/she can negotiate with the lender for a lower interest rate. Therefore it is wise to know about the ideal credit scores to have before applying for loans to ensure a hassle-free loan procedure.
Choosing the right interest rate
There are two types of interest rates available in the market, namely fixed and floating. Since interest rates play a pivotal role in determining loan EMIs. Borrowers need to choose carefully to ensure an affordable repayment.
For fixed interest rates, the interest rate will be the same throughout the tenor. While for floating rates, the interest rate will change depending on the market. Usually, floating interest rates are comparatively lower than that of fixed, resulting in lower EMIs.
So borrowers must factor in the pros and cons of the interest rates and make an informed decision.
Apart from these borrowers must also know the tips to grow the business to ensure substantial revenue in the long run.
Market research and comparing lenders
While availing of a business loan or any financial product borrowers should always thoroughly research financial or non-financial institutions. To avail competitive interest rates against a loan amount.
One can go through research business plans before connecting with the available lenders in the market. In such a scenario, borrowers can use a business loan EMI calculator to determine the suitable amount they can afford to repay.
A healthy relationship with the lender
If a borrower has availed a loan from a financial institution with which he/she has a healthy and existing relationship. Then he/she can negotiate for a lower interest rate. With a healthy relationship with the lender borrowers can ask for a better interest rate on their loan amount. And significantly reduce EMIs.
Besides, eligible borrowers can also avail of pre-approved offers extended by reputed financiers such as Bajaj Finserv. These offers are available on a wide range of financing options and further streamline and accelerate the loaning procedure. Therefore, prospective borrowers can check their pre-approved offers by mentioning their name and contact information.
Along with using a business loan EMI calculator, borrowers need to know these factors to reduce their EMI and ensure hassle-free repayment.