If you are going to plan to increase your current business. But due to the high-interest rates charged by the financial institution and it affects your business loan EMI. Then there is a need to know that there are some ways to reduce the EMI on your business loan. Few points that help to reduce EMI amount that is Cibil Score, Part prepayment, Long tenure, Negotiation, Balance transfer, Market research, Collateral, Business vintage.
There are basically two different types of business loans secured and unsecured business loans. So in secured loans, you have to provide some collateral, security or guarantee for taking a loan whereas in unsecured business loans. You do not have to provide any kind of security for taking a loan.
|Particulars||Secured Loan||Unsecured Loan|
|Security||It required collateral, security and guarantor||It do not required any security|
|Interest Rate||Low interest rate||High Interest rate|
These are points where you can get business loans at a lower interest rate. Let’s know about some ways that can help reduce the interest rate on your business loan.
CIBIL Score:- The cibil score is three numeric digit numbers which start from 300 and end at 900. Basically your cibil score tells your ability to repay the loan. Generally, a good credit score is considered above 700. Therefore a good cibil score always plays a significant role in reducing the interest rate on a business loan. If you have a good credit score then you have more chances to get a business loan at a low-interest rate. Whereas if you have a bad cibil score then you may get a business loan at a very high-interest rate.
Negotiation:- So if the borrower has a high cibil score then you can negotiate and avail the business loan at a lower interest rate on the business loan. Always remember that when taking a business loan from any lender. You always read about the loan terms and conditions. So that you can negotiate with the lender for a lower interest rate. Even if you are an existing customer, you can negotiate only when you have a good relationship.
Long Tenure:- Another main factor that helps in reducing the EMI amount is long tenure. Suppose you are choosing a long tenure for your business loan then the total amount of EMI will be distributed for a long period. This is the way that helps in reducing your monthly Equated Monthly Installments. This will certainly reduce your EMI by increasing over the long term but the overall amount payable on business loans will increase.
Balance Transfer:- The best way to reduce your EMI through balance transfer. If you have already taken business from any financial institution. So you can transfer your business loan to another lender so it helps to reduce your monthly EMIs. Now almost all financial and non-financial institutions are facilitating balance transfers. With the help of a balance transfer facility, you can reduce your monthly EMI burden.
Prepayment:- Prepayment is a payment that can be made early then the loan tenure period. With this prepayment, the customer can save a lot of interest on your business loan. If you have taken a business loan from one of your financial institutions and after some time your business starts making a profit and you are going to close your loan by prepayment. This is the method where you can reduce the burden of your monthly EMI.
Market Research:- When taking a business loan you should always research a financial and non-financial institution that offers a competitive interest rate on business loans. Go through research business plans before contacting the lenders. This may help in reducing the EMIs of the business loan.
Healthy Existing Relationship:- If you are taking a loan from a financial and non-financial institution with whom you have an existing relationship. So you can easily negotiate the interest rate with the lender. If you have a good relationship with a financial institution. you can take advantage of a lower interest rate on your loan amount.
So these were the ways that can help you to get a business loan at a lower interest rate. But make sure to pay your dues on time and build the trust of the lender.