Small and medium-sized businesses that are an essential component of a developing economy can apply for MSME loans. An MSME loan provides a number of benefits, including no collateral requirements, low-interest rates, government assistance, and loans up to Rs. 50 lakhs. The most common lending option for business owners is MSME loans, which are supported by the government through tax benefits.
You want your business to be successful because you’re an entrepreneur. However, in order for your business to reach the milestone, you must fulfill some financial conditions. These financial requirements, such as modernizing the existing business, buying inventory, installing new equipment, boosting working capital, or staying one step ahead of the competition, can be met with the aid of an MSME loan or business loan.
Have you submitted an application for the EMI-paying business loan? But are the high-interest rates harming you in any way? However, there are certain strategies or advice that can help you reduce your loan EMI. To ensure that your loan does not adversely affect your monthly budget and pay burden-free EMI for your MSME loan scheme, keep reading to understand the strategies stated below.
Tips for reducing EMI burden
Increase your repayment term
It is among the best strategies for reducing your EMI. Because the duration of your loan payback period is inversely proportional to the sum of your loan’s EMI, choosing a longer repayment term for your business loan reduces your EMI load.
Your loan is repaid over a longer period of time when you extend the repayment period, which lowers your EMI. However, keep in mind that choosing a longer term will result in a greater overall interest payment because the interest rate on a business loan is computed annually.
Refinancing or consolidation of loans
If you can refinance your loan at a lower interest rate. The benefit of this refinancing ought to outweigh the costs associated with switching from one lending institution to another.
Additionally, if you have several loans, it might be challenging to keep track of EMIs and interest rate fluctuations. If you want to avoid fines and a worse credit score due to missed EMIs, think about debt consolidation, which includes combining several loans into one. The goal is to get a loan with an interest rate that is significantly lower than what is already being paid on existing loans. A single loan streamlines repayment in addition to having a reduced interest rate.
You can pay a higher EMI at any time
Prepayment might result in lowered principal balances and shorter loan periods. It is also a great strategy to lessen the burden of interest while reducing the overall number of EMIs.
You may make additional EMI payments each year (in addition to the usual number of EMIs). It is an effective strategy to reduce the length of your loan and, consequently, your interest rate.
Opt for a lowest EMI possible
Longer payback terms, low-interest rates, or a combination of the two commonly result in low EMI offerings. As a result, choosing low EMIs may result in you paying your lending institution a higher interest rate. Calculate your interest expense during the loan term and your ability to make payments using online resources like the EMI calculator before making a choice.
Be financially prudent
Sometimes the simple things matter when it comes to keeping your money in order. Even though we’ve spoken about a variety of techniques to lessen your loan load so far, you might need to adjust your way of life to allow for loan repayments and make sure you have enough money to pay higher EMIs.
A lifestyle change is necessary up until all obligations are settled. It means cutting out on luxuries and wasteful spending. You should put off everything else so that you may focus on this. The elimination of MSME loan debt should be the top priority.
Conclusion
India’s overall economic and social development is aided by the MSME sector. However, a lack of financial resources may act as a deterrent and prevent them from expanding. 80% of MSMEs in India lack formal access to business financing, according to ACCAI. The issue has been made worse by the decline in economic activity during the COVID-19 lockdowns.
Business owners, therefore, need an MSME or business loan. It can help them remain productive and efficient during challenging business cycles. Additionally, it provides them with financial support so that they can continue operating their business as usual without interruption. However, if you’re looking for advice on how to pay your MSME loan’s EMI without feeling burdened, we hope this post will help.
