So you have calculated your estimated EMI amount but maybe it is too high for you and you want to know how to reduce the monthly EMI amount. That is understandable and to know how to reduce your EMIs, it is important to know what effects your EMI.
When you tweak one or two of the following factors, it will result in your EMI being reduced. The major factor which affect your monthly EMI amount are:
1. Rate of interest: Without any doubt, the rate of interest is very important when it comes to your EMI amount. As stated earlier, your monthly EMI amount involves two major amounts: the principal amount that you are repaying every month and the accrued interest calculated using the rate of interest you are borrowing your loan at.
Rate of interest is a highly competitive factor among banks and financial institutions because lower the interest rate, more will be the customers who come into the bank to take the loan. It is therefore important to explore all possible interest rates from all institutions. After proper research settle on the one that is best for your loan amount. Remember, higher the rate of interest, higher will be your EMI and lower the rate of interest, lower will be your EMI.
2. Loan Tenure: The second major factor that affects your EMI amount is the loan tenure. Loan tenure refers to the time period over which you will be repaying off your entire principle loan amount. Having a longer loan tenure would mean that your principal repayment amount is stretched out over many years and hence it will be lower. But it is also important to keep in mind that your interest will also keep increasing when the tenure keeps increasing.
This is a dicey situation and needs much thought and deliberation. On one hand your principal amount you are repaying every month is reduced over longer loan tenure but your accrued interest also increases. Try out all possible combinations of loan tenure and rate of interest using the business loan calculator to know which is best for you.
3. Loan Amount: Last but not least the loan amount itself is an important factor of EMI calculations. Since the principal loan amount is the base for the EMI calculations, as per the formula stated above, it would make sense to tweak your loan amount a little bit. The higher your loan amount, higher will be your EMI and lower the loan amount, lower the EMI.
As a business, you have different needs that involve a lot of money which is why the loan amount is somewhere you would not want to budge at. This is where the benefits of using an online business loan calculator shine through. Enter the loan amount you want, over the tenure you want and the rate of interest you wish to have, and tweak one or all of these factors to know what amount you are comfortable with.