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What Can Affect Interest Rate On Business Loan?

Business loan is an easy financing tool which lets businesses increase their working capital. This in turn, lets them divert finances to different areas of their business. When you think of taking a business loan it is thus recommended to opt for lenders like NBFCs or financial institutions which offer loan as per your profile and an easy-to-meet eligibility criteria. Fulfilling this criteria ensures that you avail the loan on lower interest rate and thus, have manageable monthly EMIs.

Besides these, there are other crucial factors that can affect the interest rate of your business loan. Let’s know them here -

Profile of the applicant

Lenders provide the loan on simple criteria so as to avoid malpractices and help genuine applicants get the needed funds. Therefore, your age, business turnover, business vintage, proof of business, bank statements are analyzed before sanctioning the required loan amount.

CIBIL score

This is an unsecured loan in nature. Thus, lenders prefer to conduct a strict background check of the applicant. In other words, a check of the applicant’s creditworthiness. This is reflected via their CIBIL score. Applicants with good score of 750+ or more are preferred. Besides, these applicants get to negotiate loan terms with the lender and pitch for higher loan amount of business loan lowest interest rate.

Type of interest rate

Applicants can choose the type of interest rate they want on the loan which can be either - fixed or floating. In case of fixed rate the monthly repayments remain the same throughout the loan tenure. While, in floating rate the monthly EMIs fluctuate as per the increase and decrease in the rate of interest.
Also Read: What Can Affect Interest Rate On Business Loan

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