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Tuesday, July 16, 2024

How to Calculate Business Loan EMI?

Securing a business loan is significant for entrepreneurs looking to fund their ventures or expand existing operations. Regarding this, one crucial aspect to comprehend when taking a business loan is to know Equated Monthly Installment (EMI). It’s essentially the amount a business must pay each month to repay the loan, and calculating it can sometimes become daunting.

What is a Business Loan Calculator?

A Business Loan Calculator is a financial tool which helps individuals and businesses estimate the Equated Monthly Installment (EMI) they need to pay for a business loan. This calculator considers key variables such as the total amount of loan, interest rate, and tenure to provide users with a clear understanding of their monthly repayment obligations.

How to Calculate the EMI of a Business Loan?

The EMI is calculated based on the total loan amount, interest rate, and loan tenure. Moreover, individuals can also calculate the business loan EMI physically or with the help of an EMI calculator online. So, let’s learn the formula and its calculation.

Business Loan EMI: [P*R*(1+R)^N]/(1+R)^(N-1)]

P= Total Loan Amount

R= Rate of Interest

N=Tenure of Loan

For accurate results, an online business loan emi calculator is recommended without human error.

What are the Factors That Affect Business Loan EMI?

1.   Loan Amount

The amount of money you borrow, also called the loan amount or principal, directly impacts your EMI. Generally, a higher loan amount results in a higher EMI since you’re repaying a larger sum over time.

2.   Interest Rate

It is set by the lender, and plays a crucial role. A higher interest rate leads to a higher EMI, as you’re paying more for the privilege of borrowing. Securing a competitive interest rate is essential to keep your EMI manageable.

3.   Loan Tenure

This is one of the most significant factors that helps determine a loan’s EMI. The duration you borrow, called the loan tenure, influences your EMI. Simply put, longer tenures result in lower EMIs, but you pay more interest over the loan’s life. On the other hand, shorter tenures mean higher EMIs but lower overall interest payments.

How to Use a Business Loan Calculator?

IIFL Finance’s business loan calculator is user-friendly, making it easy for you to navigate and offer a hassle-free experience.

Here’s how you can use the EMI calculator: –

  1. Take the help of a slider to choose your loan amount.
  2. Select the tenure for your loan.
  3. Adjust the interest rate using the slider.
  4. Click “Submit” to get instant results. The calculator then presents your monthly EMI and the total amount you’ll repay over the loan period.

The Bottom Line

A business loan emi calculator is a valuable tool for borrowers to plan and manage their finances effectively. Moreover, it empowers them to understand the financial implications of a business loan, make informed decisions, and ensure that the loan aligns with their budget and business strategy.

Overall, it simplifies the complex calculations associated with loan repayment, making the financial planning process more accessible and transparent.

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