How to Reduce the EMI Burden on the MSME Loan?

msme loan

Micro, Small, and Medium-sized Enterprises (MSMEs) take an MSME Loan for meeting their working capital requirements, boosting, or managing cash flows, expanding their business, etc. There are many banks and Non-Banking Financial Companies (NBFCs) in India that offer an unsecured Business Loan for MSME at low interest rates. These unsecured loans come with a flexible repayment tenure and can be repaid over time in the form of EMIs. But those EMIs can take out a big chunk of your monthly income.

A loan is an added expense, over and above your existing cash outflows, hence an MSME Loan with a high interest rate can put extra pressure on your cash flows. 

Also Read: What is the Time Span of Credit Dispensation to MSMEs?

Surely there must be an effective way to reduce your EMI burden over time. Wouldn’t it be great if it can be done as soon as it is possible? Don’t worry, in this article, we will discuss how you can reduce your EMI burden on the MSME Loan:

Tips to Reduce EMI on MSME Loan:

Below are some useful tips that you can follow to reduce the EMI burden on the MSME Loan:

  • Borrow as Much as Required

Though MSME Loans are smaller loans offered for a shorter time, it is important to decide the right loan amount because even a little extra EMI amount every month can make a big difference over the tenure of the loan. Hence, entrepreneurs must calculate their financial requirements and borrow only as much as required to reduce their EMI burden. 

  • Compare Interest Rates

Borrowers must compare the interest rate of different loan providers before opting for a Business loan for MSME and choose the one that offers the best deal as per their requirement. 

  • Part or Full Prepayment of Loan

Loan prepayment can help you close your loan before its stated tenure and reduce your loan burden over the longer term. In case you have received a salary hike or have surplus money, it is highly advisable to fully or partly prepay your MSME Loan. As we already know, a higher outstanding loan amount will attract a high interest rate. Thus, while full loan prepayment will reduce your loan burden completely, part prepayment will certainly reduce your EMI burden by not only reducing your principal amount but also the loan term. You can also use Business Loan EMI calculator to calculate your EMI on loan repayment. 

  • Increase Payment Tenure

As the loan tenure increases, there will be a decrease in the monthly EMI liability since the amount of repayment gets distributed over more years. Hence, it will result in lower EMIs. 

  • Transfer an MSME Loan with Lower Interest Rate

To reduce your EMI burden on the MSME Loan, the balance transfer approach is highly effective. You can refinance your loan with another bank or Non-Banking Financial Company (NBFC) and take the benefit of lower interest rates. This results in lesser interest outgo and lower EMIs thereby making it easier for you to repay your loan. However, use these balance transfer tips only after doing thorough research

  • Negotiate With Lenders for Lower Interest Rates

MSMEs must contact their lender and negotiate loan rates. Sometimes, negotiation will result in lower interest rates and decrease the EMI burden. 

  • Know Hidden Charges

Before opting for a Business loan for MSME from any lender, businesses must know about all hidden charges as they can significantly impact the loan amount.

  • Investing in Deposit Schemes to Earn Extra Interest

Signing up for the one-time deposit schemes offered by leading lending institutions is another smart way to reduce your EMI burden. Under such a deposit scheme, businesses can deposit a fixed amount of money every month and earn interest on it. In turn, the earned interest can be used for paying MSME Loan EMIs. 

To Conclude

These above-mentioned tips are sure to help you reduce the EMI burden on MSME loans. Further, a very important part of learning how to reduce your loan burden is also knowing how to choose the right lender.

Also Read: Benefits of a Digital MSME Loan for Business Owners

If you do thorough research and compare the offerings available to you, you will be able to find out loan offers that are cost-effective and replete with lucrative benefits. 

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