5 Easy Ways to Fast Pay Off Your Business Loan Efficiently

A Business Loan is a type of loan available to individuals or enterprises for starting or expanding their business or for bridging a cash shortfall.

What’s good is that with  a simple Business Loan application process, Poonawalla Fincorp ensures funding is never an obstacle when striving towards success. We provide offline and online Business Loans in India to the MSME sector, and we've tailored our products and services to meet your unique requirements. However, if you have to handle many loan instalments at once, your financial situation might be strained. So, to help you pay off your debts more quickly and achieve financial security, let’s first see how Business Loan repayment works.

What Is Business Loan Repayment?

Whenever you borrow funds from a lender or a financial institution, it is a given that you will have to pay it back as you cannot have full ownership of the funds. Lenders collect a certain amount of funds every month in the form of equated monthly instalments (EMIs) with agreed-upon interest rates over a set period. Just like any other secured or unsecured loan repayment, Business Loan repayment works similarly. Read on to understand how you can approach Business Loan repayment for better financial management.

How does Business Loan repayment work

The type of Business Loan you have obtained will decide how much you must return. Depending on your needs, the lender’s interest rate policy, the tenure of the loan, and the purposes for which the money was borrowed, you can employ several techniques to determine the repayment schedules for loans. Some loan repayment choices are:

• Equated Monthly Instalments (EMIs): To repay the Business Loan, which entails payments through a series of planned monthly payments, borrowers pay a fixed amount every month, called EMI which is the most popular form of debt repayment. A portion of the principal and interest amounts are included in the EMI amount. You make a pre-set instalment payment on a specific day each month until the loan is paid off at the end of the term.
• Payments in Bullets: With this kind of loan repayment, the borrowers simply pay the interest that has accumulated over the course of the loan. At the conclusion of the loan term, the principal amount is repaid in a single payment. This sort of repayment plan, also referred to as interest-only loans, is extended for a defined term, usually with a maximum of around five years.
• Loan Prepayment: In this type of Business Loan process, you can prepay a loan before the loan term expires. If a borrower has some additional money and wants to complete their financial commitments as soon as feasible, they typically follow this approach. But different lenders may have different penalties for early loan payback.

Also Read: How Young Entrepreneurs Can Utilize Business Loans Effectively?

5 Easy Ways to Pay Off Your Business Loan Fast and Efficiently

Now that you are aware of how Business Loan repayment works, let’s dive into how you can pay off your Business Loan quickly. Knowing how to efficiently pay off your current debt will not only save time but will also enable you to save more of your hard-earned money.

Here's how to easily pay off any outstanding Business Loans.

1. Make partial payments

Rather than just making a monthly instalment payment on a Business Loan, you can use any excess money to pay off your debt sooner. Although the lender might charge you a fee for doing this, it will undoubtedly speed up your loan repayment.

2. Increase your EMI percentage

If you believe you can make ends meet by reducing your spending or raising your income, you can talk to your lender and ask them to raise the EMI payment by a specific percentage. The viability of this approach will entirely depend on the policies of your lender and the type of Business Loan you have obtained. The benefit of this is that you can pay back the Business Loan more quickly.

3. Refinancing your Business Loan

If you can apply for a balance transfer of your Business Loan and discover a better offer and lower interest rates from another financial institution, you might want to do so. However, always consider the viability or overall benefits of refinancing your current Business Loan before deciding.

Most lenders impose fees on the outstanding principal amount when borrowers attempt to foreclose a loan before a pre-determined number of EMIs have been paid in full. You will also be charged a processing and administrative costs by the new lender, so it is advisable to consider the overall cost before choosing to transfer your balance.

4. Opt for shorter repayment term loans

Pick a loan with a more manageable repayment period. A shorter loan repayment period is preferable to a longer one. The total amount of interest paid and the likelihood of missed payments are reduced with shorter loan terms. 

5. Maintain a positive working relationship with the lender

This is the most underappreciated tip in the banking sector, and borrowers frequently overlook it. All EMIs must be paid back on time to have a positive working relationship with the lender, as does regular communication. You'll become more credible, which will improve your chances of getting a loan with favourable terms.

All in all, be prudent while borrowing. Avoid taking on more debt than you can afford to repay because doing so may throw your repayment schedule off-balance and if you can't afford the instalments, it might have long-term consequences on your business. So, make the most of your resources and make an ongoing effort to pay off the loan early.

Business Loan Repayment Calculator

You must have a fundamental understanding of how your repayment options are determined. By doing this, not only you can prevent financial surprises but avoid having to hunt for more cash in case of an emergency.

A Business Loan Repayment Calculator can help you anticipate what to expect when you decide to go for a loan. It assists in deciding:

• Your outstanding loan amount
• Your recurring monthly loan payment
• How various interest rates impact the balance of your loan
• How much interest you'll pay throughout the loan tenure
• Your overall loan cost
• When will you be able to pay off your loan
• How the size of your loan will impact interest rates and payments

You can use a Business Loan Repayment Calculator to estimate your monthly payments for various loans. Enter your loan amount, terms, and annual interest rate in the calculator here, then click on ‘Calculate’ to finish.

Also, check out these 3 Simple Steps to Calculate Loan Re-payments on Your Own!

Conclusion

Closing on your Business Loan early gives you greater confidence and frees you up to concentrate more on your business expansion. But calculate and weigh the advantages and disadvantages before thinking about early payments.

You should always consider the regulations as well as any fees or penalties associated with prepayment or foreclosure. If there are any, discuss early repayment options for Business Loans with your lender. Additionally, pursuing early repayment shouldn't cause your business cash flow to suffer or force you to take out a second loan.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Business Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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