The world of finance can be complex, especially when it comes to securing a Commercial Property Loan. Some challenges borrowers often face are understanding their monthly financial commitments, gauging their eligibility, and knowing their interest implications. However, loan repayment planning can be easier with tools like a Commercial Property Loan EMI calculator.
This guide aims to address your pain points and introduce you to the power of this crucial financial tool.
Unravelling the Basics of EMI Calculator
Before diving into the specifics of an EMI calculator, it’s essential to comprehend some fundamental concepts. Equated Monthly Instalments (EMI) are your monthly payments towards your loan. They are composed of the principal amount and the Housing Loan interest.
On the other hand, Commercial Loans are financial products tailored specifically for purchasing or constructing commercial properties. Unlike personal or home loans, Commercial Loans have different considerations, like the property’s potential profitability and the borrower’s business stability.
The EMI you pay depends on the loan amount (principal), the interest rate, and the loan tenure.
- Commercial Loans are typically used for purchasing or constructing commercial properties such as office spaces, retail outlets, or warehouses.
Why EMI Calculators Matter
An EMI calculator is a financial tool that calculates the monthly repayments (EMIs) you’ll make towards your loan. Despite the availability of this tool, there are certain misconceptions that borrowers may have. It is essential to remember that:
EMI calculators give you an estimate of your loan repayment amount, which assists in better financial planning.
- They should not be confused with eligibility calculators. While the former calculates your loan repayments, the latter determines your eligibility for the loan.
- EMI calculators can’t calculate the interest rate on your loan. They can only provide your monthly repayment amount based on the input values, such as the loan amount, tenure, and Housing Loan interest.
Understanding the Functioning of Commercial Loan EMI Calculators
A Commercial Property Loan EMI calculator operates on the basic principle of PIT – Principal, Interest rate, and Tenure. Let’s break this down:
- Principal: This is the loan amount you borrow from a lender. For instance, if you want to purchase a commercial property worth INR 1 crore and plan to make a down payment of INR 20 lakh, the principal amount you need to borrow would be INR 80 lakh.
- Interest Rate: This is the rate at which the lender will charge interest on the principal amount. Let’s say, for example, the current market interest rate for Commercial Loans is 6.5%.
- Tenure: This is the duration you’ll repay the loan. The tenure is usually in months. For example, a 10-year tenure would be represented as 120 months.
Please note while the EMI calculator uses these factors to calculate the EMI, it cannot calculate the housing loan interest rate.
How to Use an EMI Calculator for Commercial Loans
Using a Commercial Property Loan EMI calculator is a straightforward process:
Enter the loan amount (principal) you wish to borrow. For instance, if the commercial property costs Rs 1 crore, and you intend to make a down payment of Rs 20 lakh, you would need to borrow Rs 80 lakh.
- Enter the interest rate. As per the current market trends, you can consider an interest rate of 6.5%.
- Enter the loan tenure. If you plan to repay the loan over ten years, enter ‘120’ for the number of months.
Once you have entered these details, the EMI calculator will display the monthly EMI you must pay.
The Impact of Market Interest Rates on EMI
While using an EMI calculator, it’s crucial to understand that fluctuations in market interest rates will directly impact your EMI. As per market trends, the lowest Commercial Loan interest rate can be stated as 6.5%. This means:
- A lower interest rate can significantly reduce your EMI and total interest.
- A change in interest rates by the RBI can affect your EMI if you have opted for a floating interest rate.
The Role of Credit Scores in Commercial Loans
In the world of loans, your credit score is an important player. However, while a good credit score can increase your chances of loan approval, it does not guarantee better loan terms. Here’s what you need to know:
The minimum credit score required for a commercial loan is typically around 700. Anything below this might risk your loan application getting rejected.
- A higher credit score might improve your chances of getting approved for a loan and potentially securing better loan terms. However, it does not guarantee a lower housing loan interest rate.
Understanding how to use a Commercial Property Loan EMI calculator effectively can be a game-changer in your financial planning process. It lets you clearly understand your future financial commitments and plan accordingly. Remember, the key to a successful Commercial Loan is careful planning, considering factors like your credit score, interest rates, and the loan-to-value ratio.