As a business owner, you might feel the need to take some funds for your business. To grow your business, to hire new people, to buy new machinery, for marketing activities, etc. A business loan involves repayment through Equated Monthly Installments i.e. paying some amount of EMI every month. EMI is the amount payable every month to the bank or any other financial institution until the loan amount is paid off. The amount of EMI depends on the amount of loan taken.
To make EMI calculation easier and quick, an EMI calculator will be of help to the business owner. These calculators help the owner in knowing the amount that needs to be paid every month.
What is EMI calculator and how it helps?
EMI is calculated using three parameters, the amount of loan, the tenure of the loan, and the interest rate charged on the loan.
The cost which is attached to the loan is the interest component. By paying EMI, you effectively repay parts of the loan and that much amount is reduced month after month. Therefore, every month, interest is charged on the reducing balance method.
With the help of an EMI calculator, you can get to know the amount you are comfortable paying each month. Based on this, you can decide if the EMI is affordable to you or not.
This will help in planning the finances better for the tenure of the loan.
Here’s how you can calculate EMI:
The three parameters one has to provide in order to calculate the EMI are:
- The loan amount
- The tenure of the loan
- The interest rate
These values have to be entered into the calculator, and the calculator then generates the value of the EMI. Different permutations and combinations using these three inputs will give you the exact EMI value that suits you.
The formula which is used to calculate EMI is:
EMI = Principal amount x interest rate x (1 + interest rate) loan tenure / ((1 + interest rate) loan tenure – 1))
- E is the EMI amount you will have to pay every month.
- P is the amount that you want to borrow.
- R is the rate of interest that is applicable on the loan, which is calculated on a monthly basis instead of the annual.
- N is the duration of the loan in months. For example, if your term is 5 years, n will be 60.
As the EMI is directly related to the amount borrowed and the interest, for a high amount borrowed, the EMI will be high and for a low loan amount borrowed, the EMI will also be low.
Another point to note is that going for a long loan tenure will lower the EMI amount but will increase the interest.
A lower EMI can increase the loan tenure i.e. a small amount can be paid every month but the loan tenure will continue for a longer period. This depends on the state of your business and the ability to pay.
Here are some advantages of using the EMI calculator/Business loan calculator:
The user only has to enter the values of the three parameters and obtain the value of EMI. EMI calculators give the provision of entering the values manually too if they have to be specific, thus providing user-friendliness.
2. Error-free calculations
EMI calculators ensure there are no wrong calculations so, that the time taken for rectifying is saved.
3. Saves time
With the availability of information like interest rates and EMI payments, the borrower just can log on to the website of any lender and apply for the loan.
No middlemen are involved in helping a borrower decide on the EMI payments. The borrower can do it on his own with zero cost. Most of the websites offer this service for free.
If you want to take a loan for your business at attractive interest rates and quick loan disbursal, contact Gromor Finance now!