Taking a business loan is one of the most important financial decisions taken by an individual. Using a business loan EMI calculator helps in making decisions on the amount of loan to be taken and the period of repayment without doing complex calculations. This article looks at the benefits of using a business loan EMI calculator for individuals availing of loans.
A business loan is a credit facility offered by banks for meeting the financial requirements of self-employed customers and enterprises. They are offered from a period of six months to five years.
A business loan is taken by an entrepreneur for running his business. The main types of business loans are term loans, working capital loans, loans against property, start-up loans, invoice financing, equipment or machinery financing, overdraft and credit card financing.
These loans are provided by leading banks, non-banking financial institutions (NBFCs) and financial institutions.
Repayment of these loans is made through Equated Monthly Installments (EMIs). A business loan EMI calculator helps calculate monthly instalments for an individual before applying for a loan. The business loan EMI calculator can be used by filling in the basic loan details like the amount of loan, loan term and interest rate.
How does a business loan EMI calculator work?
There are three important components of a business loan EMI calculator:
- Amount of Loan
- Tenure of repayment
- Rate of interest
EMI calculator formula
E = (P*r (1+r) ^/(1+r)^n-1)
E is Equal Monthly Installment
P is the Principal loan amount
R is the Rate of interest calculated on a monthly basis
N is The duration of the loan
The business loan EMI calculator helps in finding out the total repayment over the tenure of the loan. The amortization schedule of the calculator provides a detailed breakup of the monthly and annual principal and interest components of the loan.
Factors affecting business loan EMI
- The loan amount – The EMI will be higher if the loan amount is higher.
- The rate of interest – A higher rate of interest will attract a higher EMI, while the EMI will be lower if the interest rate is lower.
- Duration of the loan – A loan with a longer duration will have a lower EMI, and shorter loan terms will attract higher EMIs.
Examples of EMI calculation for a business loan
Here are two examples of business loan EMI calculators at different interest rates.
Loan Amount – Rs 5 lakhs
Tenure – 3 years
Interest rate – 12 percent
The EMI will be Rs 86,274 per month
Interest paid will be Rs,17,645
Total amount paid Rs 5,17,645
The working EMI, interest, principal, and outstanding loan amounts can be clearly seen in the loan EMI calculator.
Here the loan amount and term, and principal remain the same, but the interest rate is 13 per cent. Now, let’s compare this case with the previous one.
EMI will be increased marginally to Rs 86,521
Interest paid will go up to Rs 19,128 (an increase by nearly 9 percent)
The total amount paid will go up to Rs 519,128
As can be seen from the above examples, the loan EMI calculator instantly gives clear calculations by only changing the amounts and interest rates.
Benefits of using Business Loan EMI calculator
Saves time and effort
A manual calculation can be cumbersome and time-consuming. In a few seconds, the loan applicant can know the exact amount of loan required. Also, manual calculations are subject to errors.
Helps in financial planning
Knowing the exact amount of EMI can help a businessman plan his finances, including budgeting and profitability statements. Repayments can be easily planned with the help of a business loan EMI calculator. The business loan EMI calculator has a detailed breakup of the principal and interest components, which will help a businessman to plan finance and structure repayment with ease before the loan is sanctioned.
Evaluates loan term and repayments
The loan EMI calculator will help a businessman check the most suitable loan amount and repayment tenures. One can check different loan amounts and repayment tenures easily with the help of an EMI calculator.
Suppose, after finding that the business generates surplus amounts and loans can be repaid, the newer lower EMIs can be easily calculated with the loan EMI calculator instead of asking the bank for the estimated benefits. The EMI figures will also help the businessman to understand whether he will be able to keep making regular payments or whether he should decrease or increase his payments.
Compares various loan combinations and tenures
A business loan EMI calculator helps a businessman compare various combinations and tenures of different loan providers and choose the best.
Numerous banks, financial institutions and non-banking financial institutions offer loans at different terms.
It is theoretically not possible to calculate the most suitable loan manually. But the EMI calculator, in a minute, enables calculation and instant combinations, which gives accurate results. This is most important as even a minor 0.01% difference in interest rates can significantly change the EMI amount.
Calculations done in the comfort of your home
A visit to the bank would lead to complex mathematical calculations. Also, a financial advisor may have vested interests and may not be as reliable as an online EMI calculator. Therefore, to calculate EMI, one does not need to visit the office or depend on a financial advisor. Online loan EMI calculators can be used anywhere at any time.
A business EMI loan calculator is a boon in times of technology. It helps businesses calculate their exact loan amount, the interest charged and loan EMIs via a basic online EMI loan calculator. We hope the article gave you some insight into the benefits of using an EMI calculator. Happy investing!