Every business requires constant funds influx to finance various organisational expenses, whether a small or a large enterprise. Unsecured Business Loans from reputable NBFCs quickly fulfil a growing firm’s varying financial requirements. Besides, these are collateral-free loans that do not require putting down an asset as security. However, applicants should check their monthly instalments using a Business Loan calculator before applying for SME loans. This online tool is a smart way to calculate EMIs and manage repayments efficiently. Read further to learn about an EMI calculator and how to calculate loan EMIs using the tool.
What is a Business Loan EMI Calculator?
Since manually calculating the EMIs is a cumbersome, time-consuming, and error-prone process, lending institutions have developed EMI calculators to do the calculations automatically. A business loan EMI calculator is a free online tool that lets users calculate the EMIs they will need to pay each month during the loan tenure. Nowadays, most customer-centric NBFCs provide EMI calculators on their websites to make calculations easier and faster for users. Aspiring borrowers can quickly calculate their EMIs by entering their loan amount, interest rate, and repayment tenure in the tool.
Checking the EMIs beforehand gives an estimate of monthly payable installments, allowing borrowers to plan their finances and select a repayment tenure with budget-friendly EMIs. Knowing the monthly installments before opting for a loan term is an intelligent move, as it has multiple benefits over the company’s monthly budget and future finances. Since the calculator does all the hard work, borrowers can now go about planning for their loan applications and get their finances in order.
Factors Affecting the Business Loan EMIs
Loan EMIs depend on the following three factors:
- Principal Loan Amount: The EMI amount largely depends on the principal amount the applicant decides to borrow. The EMIs are higher for a bigger sanction and vice versa.
- Rate of Interest: The interest rate is crucial in computing the loan EMIs. So, it makes sense to check loan offers from various NBFCs and opt for the lowest interest rate plan. However, consider other factors besides interest rates while choosing a loan scheme, including processing charges, additional charges, customer service, etc.
- Repayment Tenure: Repayment tenure is also important for deciding the loan EMIs. Longer terms ensure smaller EMIs, while shorter terms increase the EMI amount. The best way is to use an EMI calculator and adjust the loan tenure until the borrower finds a conveniently repayable EMI amount.
How Does an EMI Calculator Work?
Business Loan EMI calculators work based on a standardized formula that computes EMIs using multiple parameters like the loan amount, interest rate, and tenure. The mathematical formula to calculate EMIs is:
EMI = P × r × (1 + r)n/((1 + r)n – 1)
P = Principal amount, R = Rate of interest, and N = Tenure
Once the user enters appropriate values at the right places, they instantly get the monthly EMI payable. For instance, if a firm owner obtains a business loan of ₹ 30 Lakh at a 16% interest rate for three years, their monthly EMI amount would be ₹ 1,05,471. After analysing their monthly expenses and revenue, they can change the loan amount or tenure to get an affordable EMI amount if they realise that the EMI is too costly.
How Does a Business Loan Calculator Determine the Payable Interest?
Using an online calculator is not just limited to computing the EMIs. Users can also use it to get a break-up of the total payable amount, along with interest and principal amounts. Since the interest rate is a substantial cost the borrower pays for the loan, being informed about it is crucial to efficient financial planning. In the above example,
The total amount payable = ₹ 1,05,471 x 36 months = ₹ 37,96,960
If we deduct the total payable amount from the principal amount, which is ₹ 37,96,960 – ₹ 30,00,000, the payable interest amount will be ₹ 7,96,960. Reducing the loan tenure will increase the EMI amount but will also reduce the interest payable due to the shorter term. So, a Business Loan calculator helps borrowers make better decisions according to their finances and repayment capacities.
How to Use a Business Loan Calculator?
Aspiring borrowers can easily access a free online EMI calculator on the websites of top lending institutions. All they have to do is follow these steps to get the desired results:
- Visit the NBFC’s website and select ‘EMI calculator’ from their menu.
- Open the calculator and move the slider to choose the loan amount suitable to the funding requirement.
- Repeat the process with the interest rate and loan tenure.
- Once the user enters all the required values, they can instantly see the payable EMI amount on their screen.
Advantages of Calculating EMIs Using an EMI Calculator
Why use a Business Loan calculator if manually calculating the EMIs is possible? Here are a few advantages it provides to the users:
Saves Time and Effort: EMI calculator is an easy way to calculate the monthly instalments, saving users a lot of time and effort. They just need to enter the accurate variables and receive the results without manual calculations.
Accurate Results: Manual EMI calculations are prone to errors and miscalculations, which can significantly disturb business finances. Meanwhile, an online calculator leaves no room for mistakes, providing accurate real-time results.
Easy Comparison of Loan Plans: EMI calculator is an efficient tool for calculating different loan plans according to their loan amounts, interest rates, and repayment terms. It helps a loan seeker choose the right loan plan and make an informed borrowing decision.
Efficient Financial Planning: The most important advantage of using an EMI calculator is that it helps borrowers plan their finances better. With a clear estimate of the monthly EMIs, they can choose a loan tenure with easily affordable instalments.
An unsecured Business Loan is a collateral-free funding option to boost the company’s productivity and performance. However, choosing a loan plan should not be a decision made in haste. A Business Loan calculator is an efficient tool that helps borrowers repay their loans without hurting their finances or compromising their net profit.