How Can You Calculate Your Monthly EMI with a Business Loan Calculator?

A business loan is a type of loan that is available to entrepreneurs who need external funding to keep their operations afloat. The loan pays for costs like hiring more staff, paying rent, purchasing equipment, and growing the company.

Equated Monthly Instalments, or EMIs, are payments made periodically to the lender for loan repayment. The two components of an EMI are the principal and interest. The total cost of the loan also includes the interest that is to be paid to the lender. This aspect also plays a major role when it comes to calculation of the EMIs.

How Can You Use an EMI Calculator for Business Loans?

You should think about a few things before applying for a business loan to make sure the one you select will fit your budget. Even though many banks provide straightforward loans with low-interest rates, it's important to weigh your alternatives and make an educated decision.

It is not necessary to be an expert in arithmetic to calculate the monthly instalment you would need to make to pay off your loan within the allotted time. To start using this helpful money management tool and improve your financial management, all you need to know are a few basic terms.

● Principal amount: Amount of money that has been lent to you that you have to pay back.

● Loan duration: Amount of time that you have to pay back the principal amount as well as the interest.

● Interest rate: Rate that the lender agrees upon to apply to the principal amount.

● EMI: Monthly repayment amount that you are required to make in accordance with the prearranged amortisation schedule.

How to Calculate Loan EMI?

EMI calculation formula:

E= P x r x (1+r)n / (1+r) n-1

Here,

● E = EMI amount

● P = Principal amount

● r = Rate of interest

● n = tenure of business loan

Assume you have taken out a Rs. 10 lakh loan to construct a home. A 10-year loan with an annual interest rate of 7.2% has been made available by the lending institution.

The monthly loan payback amount determined by the formula is: E= P x r x (1+r)n / (1+r) n-1

N is 10 years or 120 months

R is 7.2% = 7.2/12/100 = 0.006

EMI = Rs 10,00,000 X 0.006 X (1 + 0.006)120 / ((1 + 0.006)120 – 1) = Rs 11,714

As a result, for ten years, you would be paying an EMI of Rs 11,714 each month. To assist you in determining how much your EMI payments will be, certain lending institutions may provide the breakdown of the principal amount and interest rates.

Why is a Loan Calculator Needed?

The days of working out your monthly payments on paper are long gone. With an online business loan calculator, you can swiftly find how much you have to repay per month just by entering some basic information.

You can also adjust the values in an online EMI loan calculator to find an apt loan plan for you - for example, you can adjust the tenure to check how it affects the EMI amount, or you can adjust the principal amount to see how much interest you have to pay.

To use an online loan calculator, simply slide the bar to set the loan amount, interest rate and loan tenure, and you will be able to see the total cost of the loan on the right side of the screen.

What Are the Factors Influencing the Amount of EMI?

Amount borrowed, interest rate, and length of payback

The EMI amount will increase in proportion to the loan amount and the interest rate that lending institutions charge. Depending on how long the loan must be repaid over, this EMI cost may change. A longer payback period will result in a lower monthly instalment payment, and vice versa.

Fixed or variable interest rates for loans

The base lending rate, or MCLR, is primarily used by banks to calculate the variable interest rates on loans. Banks independently adjust the MCLR rate, particularly in response to RBI changes to the repo rate.

Loan prepayment or foreclosure

Borrowers can lower the amount of EMIs left by foreclosing on their loans. Before the planned closure date, loans can be closed by paying the outstanding debt in full or in instalments. Recall that, depending on the lender's policy, extra rates and GST may be applied to the lending rate.

Key Takeaway

Calculate your payback amount before applying for any loan to be sure the EMI payments won't put a strain on your resources. By using the EMI calculator formula, you can plan your finances appropriately and in advance. You may then handle your money in the most effective way possible.