Understanding Business Loan EMIs: What You Need to Know Before Calculating
The Hindu
Understanding Business Loan EMIs: What You Need to Know Before Calculating
When running a business, securing the right financing is essential for growth and sustainability. Business loans offer the necessary capital, but understanding the repayment process, particularly the EMIs, is crucial.
Understanding EMIs helps you manage your business finances better. Knowing your monthly obligation ensures you can plan your budget, avoid cash flow issues, and make informed financial decisions. Before you calculate your business loan EMI, here’s what you need to know.
Several factors influence the calculation of your business loan EMIs:
The loan amount, or principal, is the total money borrowed from the lender. Larger loans result in higher EMIs because you have to repay more money.
The business loan interest rate is the cost of borrowing the loan. It’s expressed as a percentage of the loan amount. Higher interest rates increase the EMI because you pay more for the loan. Also, understanding the type of interest rate on your business loan is vital. There are 2 main types of interest rates charged on business loans:
The loan tenure is the duration over which you repay the loan. Longer tenures reduce the EMI because the repayment spreads over more months. However, this means you pay more interest over the loan’s life.
In the case of some business loans, particularly those for property or construction, you might encounter pre-EMIs. Understanding the difference between pre-EMI and regular EMI is essential:
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