Why Should You Use moneyview’s Business Loan Interest Rate Calculator?
There are many reasons to calculate your EMIs before taking a loan.
The first and foremost is that having an idea about your EMI amount can help you plan your finances effectively.
Also, trying to do these calculations manually may leave room for some kind of human error which might wreck your financial planning. The reason why you should use moneyview’s business loan calculator is that it is fast, effective, and error-free.
The business loan EMI calculator by moneyview calculates and provides the EMI amount that you will have to pay, along with the amortization schedule (more on this below) in an instant.
Read on to know how to use our commercial loan EMI calculator.
How Does The moneyview Business Loan EMI Calculator Work?
Every loan needs to be repaid through EMIs or Equated Monthly Installments. This amount depends on many factors like the principal amount, the interest rate, the repayment tenure, etc.
In order to use the business loan calculator, follow the steps given below -
• Enter the principal amount that you wish to borrow. You can either type it or adjust it using the slider
• Provide the interest rate charged.This too can be either entered or adjusted using the slider
• Lastly, enter the repayment tenure.
Once you have entered all of the information mentioned, our business loan calculator will display your EMI amount. You will also see your EMI schedule displayed there.
Business Loan EMI Calculation Formula
If you are interested in knowing the formula that is used to calculate EMI, you can check it out here-
P x R x (1+R)N / [(1+R)N-1]
• P is the Principal Amount.
• R is the Rate of Interest.
• N is the Number or tenure in number of months.
For example, if Rs. 15,00,000 is the amount borrowed (P), 18% is the rate of interest imposed (R), and the 36 months is the tenure (n), the EMI to be paid using the above formula will be:
15,00,000 x 0.015 x (1+0.015)36 / [(1+0.015)36-1] = Rs. 54,229 (per month)
Thus, the EMI for a Rs.15,00,000 loan on 18% interest will be Rs.54,229.
The rate of interest (R) is calculated monthly i.e. it is calculated as (Annual Rate of interest/12/100) in this case (18/12/100 = 0.015)
Business Loan Amortization Schedule
Apart from the EMI amount, it is also important to also know your amortization schedule. This is essentially a table that shows the amount of principal and interest left in each payment until the loan is fully repaid.
For eg. in the case mentioned above, for a principal amount of Rs.15,00,000 with interest rate and repayment tenure being 18% and 36 months respectively, the EMI amount based on the formula is Rs. 54,229 per month. The table below illustrates the amortization schedule of this loan in detail.
Factors Affecting Business Loan Interest Rates
The rate of interest depends on a variety of factors. It is important to have a knowledge of what affects your ROI. Take a look at some of the major factors that impact the ROI for your business loan-
Your credit score is a number that portrays your credit behavior. The higher the number, the better are your chances of getting a lower rate of interest. This is because a high credit score indicates good creditworthiness and lower risk of default.
What credit score is considered high might again depend on your loan provider. You can show either your CIBIL or your Experian score as your credit score.
When it comes to a business loan, obviously the type of your business will affect your interest rate. The riskier the business, the higher is the rate of interest charged. If the business you wish to undertake guarantees early profits with lesser risks, you might get the loan at a lower rate of interest.
If the businessman has prior experience of running a business, they may be able to avail loans at lower interest rates. This is because an experienced entrepreneur will be better equipped to deal with unpredictable challenges that might come up.
Whether the business itself is new or old will also play a significant role in deciding the rate of interest. If it is a new business, there will be significantly higher chances of it not doing so well, as compared to an up and running business.
- • Loan Amount and Repayment Tenure
As is the case with every other loan, the amount availed and repayment tenure chosen will impact the rate of interest. A lower loan amount and a shorter repayment period will attract lower rates of interest as the perceived risk for defaulting is low.
If you already have existing debts, your debt to income ratio will be higher. In that case, you might not be able to get loans at low interest rates. But if your debt to income ratio is below the recommended level, you might easily get loans at competitive interest rates.