How to Use a Business Loan EMI Calculator?

Funds are essential for any business’s growth and expansion. You may need funds to open new branches of your business or for the digitisation of the processes or to invest in a new product your company is developing—the reason could be any but the requirement remains the same. Availing of a business loan can help you meet the financial needs of your business. But a missed payment on a business loan not only impacts your credibility but also increases the burden of unpaid instalments. Therefore, it is important to calculate and plan the EMI before you apply for a loan.

This is where a business loan EMI calculator comes in handy. It aids in the planning of the monthly budget and expenditures by providing a realistic image of the monthly loan repayment obligations. By using the business loan EMI calculator online, you can choose the amount and tenure of your business loan. It also helps in determining an individual’s loan eligibility.

Also Read: A Quick Guide To Finding The Right Loan For Your Business

How to use a business loan EMI calculator?
A business loan EMI calculator is a simple and convenient tool. You can use it by entering only three variables—the principal amount, loan repayment tenure in months and the small business loan interest rates. Once you have entered all the details, you can easily determine your EMI within seconds. Here is a step-by-step guide for using a loan EMI calculator:

1. Open an online business loan EMI calculator tool.
2. Select the principal amount, or the sanctioned amount, using a slider.
3. Enter the loan repayment tenure that is best suited for your business.
4. Enter the interest rate applicable on your business loan.
5. After entering all the variables, click on the submit button to get the EMI details.

The EMI calculator is a simple tool. It can help you in making the most of a business opportunity by providing accurate financial projections and plans. Using this calculator, you may also compare loan plans from various lenders. As a result, you may get a low-interest business loan.

How to calculate business loan EMI?
The EMI for a business loan is calculated using the loan amount, the interest rate provided at the time of disbursement, and the loan's total term. However, there is another way to calculate the loan EMI. You may use a mathematical formula to calculate the EMI of your loan. The mathematical formula for calculating loan EMI is as follows:
EMI = P x r x (1+r) n / (1+r) n-1
Where,
P stands for Principal Loan Amount
R stands for Rate of Interest
N stands for Loan Tenure
Calculating your loan EMI manually using the aforementioned technique, as opposed to using the online calculator, may take a long time. In addition, the intended result may not be as dependable as the outcome provided on the calculator.

Also Read: Fuel Your Business Growth With Unsecured Business Loans

 

How to calculate business loan interest rate in India?
When you apply for a business loan, the business loan companies impose a fee on the loan amount in the form of interest rate. The interest rate is denoted in the percentage of the principal. While applying for a loan, your lender quotes two different types of interest rates—a nominal rate of interest and Annual Percentage Rate or APR.

The annual rate of interest charged by the lender is known as the nominal interest rate. Whereas, APR is the total annual cost of a loan including the processing fees, interest and other associated costs.

In addition, the effective interest rate indicates the true cost of a loan when compounding is taken into account. The effective interest rate is calculated using the following mathematical formula:
(1+r^n)-1
Where r denotes the periodic rate of interest.

Factors affecting the loan EMI:

• Loan Amount: The loan amount or principal amount is the amount you are willing to take or the amount your lender has sanctioned. It plays an important role in determining the monthly loan payment amount. The EMI payment tends to increase proportionally as the loan amount increases.
• Rate of Interest: The interest rate is determined based on various factors such as the borrower’s age, income, credit history and repayment capability. This, however, may vary from one lender to another.
• Loan Tenure: The EMI amount fluctuates greatly with the change in loan repayment tenure. If a borrower opts for longer repayment tenure then the monthly EMI gets reduced and vice versa. However, longer tenure increases the interest component of your loan.

 
Also Read: Simplifying Business Loan Documentation

To Conclude
Manual calculation of EMI is challenging because it is a lengthy and time-consuming process. Using a business loan EMI calculator instead helps in organising finances and saves time. Calculating your EMI ahead of time is a great way to start the process of obtaining a business loan. It helps you to reduce your monthly EMI obligations so that you can run your business smoothly without any hassle.