EMI Calculators And Business Loans – Facts And Myths

Loans have become ingrained in our everyday lives. 

Whether it’s a new business you want to start or borrow capital for running the operations of your business smoothly, taking out a loan is one of the most efficient solutions to save yourself from instant major costs.

Most importantly, when it comes to loan repayment options, equated monthly instalments (or EMIs) make our repayments even more convenient and affordable.

The amount of money we decide to pay back in order to clear our debt every month are referred to as EMIs. 

Before you apply for a loan, you will need to check your eligibility status among other things such as the amount you will need, the interest rates that you will be able to afford as well as the monthly payments that you will be able to pay back over a period of time. 

Taking all of these things into account may become hectic and here is where the EMI calculator comes into the picture. The loan EMI calculator will help you with understanding and designing your repayment schedule in an easy way. 

In case you want to take a loan for yourself/your business, a loan EMI calculator is something you’d want to refer to.

What is an EMI calculator?

As the word suggests, an EMI calculator allows you to calculate the amount of money you need to pay back every single month in order to clear your debt in a given time frame. 

For the sake of understanding, the repayment time duration and interest of a loan, a loan EMI calculator will exactly help you figure out how much money you'll need to repay the loan.

These days, online EMI calculators are widely accessible. All you have to do is enter the loan amount, loan period, and interest rate to receive an estimate.

Calculating your monthly payback before enrolling is a smart decision that will help your monthly budget, future cash flow, and other elements of your life. 

However, a lot of businessmen are sceptical about taking a loan because of misconceptions and the things they ‘heard from others’. That’s why we have drafted a few myths about business loans and debunked them with facts that you might want to know.

Loan EMI calculator: Myths

Myth - High-interest rates directly translate to high monthly instalments

Fact - EMI mostly depends on your pay rather than the interest rate

Despite the common belief that greater interest rates imply higher monthly payments, this is rarely the case in reality. 

In order to compensate for a high-interest rate, banks often prolong the loan's maturity period. As a consequence, your monthly instalment payment will be minimal, saving you money. 

Other factors including the debtor's income level are taken into consideration while setting the EMI. The sum of money you're allowed to borrow is determined in part by your monthly take-home pay. 

It’s important to keep in mind that a shorter loan period means a higher monthly payment. High-interest rates cause many consumers to fail on timely repayments which lower their credit score.

Myth - Cheaper loans have lower interest rates

Fact - Lower interest rates do not directly mean cheaper loans.

Low-interest rates imply lower monthly payments, but there are a number of other factors to take into account. 

A rise in your EMI payment is possible if certain charges are overlooked and left unaddressed such as some sort of hidden fee or terms and conditions in the fine print. 

Low-interest loans, on the other hand, could be limited by the fact that they must be repaid over a prolonged period of time. The low interest is undoubtedly important, but it is not the lone factor to take into account.

Myth 3 - A high credit score will guarantee you a good loan approval

Fact - A high credit score does not guarantee you a loan

Credit ratings, like first impressions, allow lenders in making informed decisions about your integrity and financial situation. 

However, credit scores alone aren't enough on their own to guarantee a loan's approval. It is common for lenders to look at a wide range of variables before giving a loan. 

On the other hand, having a bad credit score doesn't really mean that you cannot get a loan.

Myth 4 - Choose personal loans over business loans

Fact - It largely depends on your circumstances if you require a business or a personal loan

It's like comparing apples to oranges when you're comparing personal loans with business loans. 

Business loans are similar to personal loans in that they provide capital and need repayment, but the similarities end there. 

Interest rates on personal loans tend to be quite high, and the repayment periods are often relatively short. To cover the needs of a single individual, the amount that can be borrowed is rather small. 

For individuals looking for a high loan amount, a longer loan period, or a low-interest rate, business loans are the ideal alternative. Hence, your needs are the driving force behind your ultimate choice of what you decide to take.

Myth 5 - It’s tough to get business loans approved

Fact - If you have all the necessary documents, you can easily get approved for a loan

One of the most popular urban legends of the last century is this one. 

Business loans are available to small and medium-sized enterprises, as well as established companies. Many new lending programs have been introduced by the government to help small and startup companies. 

The time for loan approval can be decreased Loan approval may be by Non-Banking Financial Companies (NBFCs) so you won't have to put up any collateral to acquire the money you need. 

Finally, the process of obtaining a business loan doesn't really take a long time. Your loan will be approved swiftly if you keep your documentation in order and deliver it on time. When applying for a business loan, having a strong credit score and an established business plan can definitely contribute to swift approval.

Conclusion 

There are a lot of urban myths in our society where loans are seen as a source of raising liabilities rather than assets. 

Therefore, we need to gather proper knowledge about things before we proceed to a conclusion. 

We have tried to bust a few common urban myths related to loans and their types. There are many other myths out there that may come your way. 

Educate yourself properly and recalculate your situation before going ahead and applying for a loan.