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How is interest calculated on a business loan

  • Highlights

  • Calculate the interest manually or via an EMI calculator

  • User the EMI calculator for accuracy and speed

  • Use the EMI calculator to find the best business loan offer

  • Choose Bajaj Finserv for affordable financing

As a business owner, loans are indispensable to you because they allow you to ramp up your production line to keep pace with demand, without contributing to financial strain. Similarly, you can use the source of finance to advertise your business, build a website and carry out other promotional or marketing activities.

However, it’s crucial that you are able execute these plans at an affordable cost. This is why it is important to know exactly how much you’re paying as interest when you take a business loan. There are two ways you can compute this. Read on to understand both options.

Additional Read: Reasons why business loans are financially beneficial

Option 1: Via manual calculation

To calculate the interest due on your business loan yourself, use the following formula.

E= P * r * (1+r)^ n / ( (1+r)^n-1 )

Where,

E= EMI

r= rate of interest, expressed as r/12*100

n= Tenor of the loan (in months)

P= Loan sanction

Using this formula, you will get a result for ‘E’. Use this value to calculate the total interest using a second formula.

T = (E*n) - P

Where,

T= Total interest

E= EMI

N= Tenor of the loan (in months)

P= loan sanction

The value for ‘T’ is the total interest payable towards your business loan. As you can see, this calculation process is complicated and can be time-consuming. Therefore, it’s recommended that you use a business loan rates calculator.

Option 2: Via a business loan EMI calculator

Today, most lenders allow you to calculate your EMI in under a minute via an EMI calculator or business loan rates calculator. It is a free tool that you can access online and since the calculation is computerised, the results are always accurate. It is available on the websites of most lenders and you only have to enter the principal amount, tenor and the calculator will apply the interest rate applicable. Thereafter, you will be able to view the EMI, total amount due and total interest due.

Use any of these two methods to know the interest payable towards your loan. As you’ll notice, the manual method has room for error, while an EMI calculator offers accuracy and speed. Moreover, you can use it to compare lenders to zero in on the best business loan offer on the basis of interest rate. This is important as it affects your cost-benefit analysis.

You’ll find that the Bajaj Finserv Business Loan is an incredibly beneficial option as it offers a high-value sanction of up to Rs.30 lakh at a competitive interest rate. You also benefit from the Flexi Loan facility that allows you to borrow as you need from the sanction and pay interest only on the amount that you utilise.

Furthermore, this loan is easy to obtain and requires minimal documentation, making it a useful resource when you are pressed for time. You can get approval in under 24 hours and use the funds to meet big and small business expenses. To expedite the loan acquisition process, be sure to check your pre-approved offer and apply using a tailored offering.

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