A business loan is the perfect mantra to starting and raising a business. While there are multitudes of financial institutions offering a wide range of loan options, real entrepreneurship begins and ends in successfully maintaining abundant cash flow. And it is where a business loan could make a big difference. Furthermore, while managing cash flows becomes easier with business financing, handling the loan and making timely repayments tends to be tricky at times. Most of the time, loan repayment becomes a burden on the borrowers who need to move back and forth in arranging money for the timely repayment of their loans. In such a situation, all of us crave for that little waiver of EMI or a bit of extra time to manage the installment amount. And it is the time when you look for easy ways to reduce the EMI payment. If you are going through the same, you are on the right page.
Here are a few smart tactics that might help in lowering the EMI or interest rate.
- Up your credit score – The credit score is something that adds to your creditworthiness to a great extent. Raising your credit score essentially signifies reducing the credit utilization ratio, which is the ratio between the available credit limit and the limit used. Thus, a better credit score can help in achieving a lower interest rate that can eventually reduce the burden of your EMI payment furniture stores in bangalore. To maintain a good credit score, it is recommended to keep the credit utilization ratio up to 30% of the overall limit.
- Never become an EMI defaulter – Defaulting your EMI is a big no-no if you wish to lower your business loan EMI. Repayment of loan without any defaults in the EMI increases your chances of obtaining lower interest rates and lowering your EMI payment.
- Grow your business financials – No matter what business you have, your business’s financial statements play a pivotal role in reducing your loan EMI. The more profitable and flourishing your business is, the more are your chances of paying lower EMI. It is because the interest rate calculations for a business loan depends on various factors such as the financial status of your business, upcoming projects, annual turnover etc. Thus, for paying a low EMI for your business loan, you need to improve your business financials and maintain the same consistently.
- Go for refinancing – Refinancing your loan is a great way to reduce your burden of EMI payment. In such a case, you need to do a balance transfer of the existing loan with a second bank. It then repays your current loan and offers you a reduced interest rate on your business loan. Thus, refinancing can prove to be of immense help in minimizing your EMI payment load.
- Opt for MSME loan – When talking about loan for msme, it is essential that your business fulfills the eligibility criteria for availing the loan. An msme loan offers lower interest rates and easy repayment options. It in turn helps in the growth and development of your business and also lets you lower the burden of EMI payments. Thus, msme registration is indeed essential in reducing the EMI for your business loan.
- Go for a higher down payment – As we all know that the down payment is the amount that you pay upfront during a purchase. Thus, if a larger part of the price is borne by you, it is evident that the loan amount will come down. Simultaneously, the interest will also be calculated on the principal amount borrowed by the customer, which in turn is beneficial for the customer. So, it is always wiser to pay a greater amount as down payment while you make a big purchase as it will lower the EMI of your loan and will also let you save more in the long run.
- Always prefer a loan with longer repayment tenure – When you opt for a long term loan, the total loan amount is uniformly distributed over a longer time span, which eventually lowers the payable amount that you are likely to pay in the form of monthly installments. So, we can infer that the repayment term is inversely proportional to the amount of EMI for a business loan. However, increasing loan tenure could also add up to a larger interest over the entire repayment term. So, it is always advisable that you choose your business loan very carefully while looking for a reduced EMI payment.
- A Step-Down EMI plan might help – Several banks and non-banking financial institutions offer a Step-Down EMI plan to their customers furniture store in hyderabad. According to the plan, you need to pay a larger amount as EMI at the start of the tenure while availing a business loan. Over time, gradually the EMI amount decreases after each monthly payment. Such a flexible scheme can be helpful in reducing the EMI in the later part of the tenure.
- Consider you existing bank for a business loan – While opting for a business loan or loan for msme, opt for the bank where you are already an existing customer as it could work in your favor. In most cases, your bank is likely to offer a lower interest rate and the best deal on your business loan since you already have a good standing with the bank.
- Try loan prepayment options for your business loan – Loan prepayment is indeed a good way to reduce the EMI amount or cost of your loan. There are options for full as well as part prepayment of your loan. While full prepayment takes away the entire burden of EMI payment, part prepayment helps in bringing down the principal amount and term of payment, thus significantly reducing the payable interest.
The Bottomline – There are multiple ways of lowering the EMI payment of your business loan. The only point of concern lies in choosing the right way that works best for your business, suits your budget and helps sustain your business growth in the long run.