Do you know the ways upon which you can better manage your personal and business loan interest rates?
Decide is the loan is necessary to take up now?
Loan interest rates are one additional burden impose on your business. Just as all other kind of operating cost that occurs in your business, you need to pay off the interest loans periodically. Just sit and calculate whether the interest you are paying every month is more than what your business is going to get or getting through the raised capital then it is better to avoid taking up that loan firstly.
If you truly want to manage the high interest rate it is wise to avoid the unnecessary loans.
Okay, you have obtained a loan for business with high interest rates and you come to know the asset you were bought with the loan is of no use to you. In this case just sell out the unused asset and quickly repay the loan. This action will help you to run your business in a smooth way.
Understanding business loan interest rate
Almost all business loan interest rates are determined based on any of the applicant or borrower’s risk profile. It may be the credit history, income flow or anything.
When you consider taking up the loans for small business first place you need to check is approaching for the government grants. These will give you the loan with some fair interest rates. Let’s say you have started a business and running the company successfully. At some point you want to take up the additional loan for the company expansion now you need to think whether your business is capable making one more additional monthly payment?
If your lender asks you to pay the high interest rates try to figure out why you have been asking to pay such high interest rates and the factor may be anything like your bad credit score or your kind of business (legitimate businesses are preferable) or your business income flow. Try to improve where your business stay behind.
Start working on it. If you want to have the loan for the emergency purposes, you can just take up the loan and when everything in your place (factors) gets improved you can walk into the lender and ask them to reduce your interest rates. But before that you should be regular with your loan payments.
Protect yourself with the stable loan interest rates
If you have obtained a short term loan then small raises levy on your loan for business is not going to affect you much especially when your loan term is 12 month or below 12 month.
For example let’s say you are taking up the loan for business with the business loan interest rate of 8%. Loan tenure is 3 years. Your principle amount is $100,000. If the bank raises the loan interest rate from 8% to 10% it is bearable. Your monthly loan interest rates will not exceed $100.
It is a good practice to think well before you take up the loan. For example if you are going to take up the loan for the amount $100,000 it will cost $12,000 in all three years for the interest rate alone. Calculate whether return you are going to get is high than the one you are paying one. If not so why should you obtain a loan for business?
If the economy is not stable when you obtain a loan you should not sign up for the loan with the variable business loan interest rates, if the interest rates gets low you are lucky, what if the interest rates doubles or triples the amount when compare to the interest rate you have now?
So it is wise to protect yourself with the fixed interest rates when obtaining loan for business.