Reduce your monthly interest by half by converting your limits into a term loan

A loan may be taken in order to fulfill any business expansion, goal, or finance an immediate need. However, one must remember that a loan is also an added expense, considering the interest which banks levy. There are certain ways or tips which can help you save money on your loan interest.

Every business has its own funding needs and requirements and can look for different financing solutions like overdraft loans or CC or term loans.

In the term loan repayment is made monthly through EMIs, therefore, it doesn’t put a burden on the customer. Usually, the amount taken from the lender is higher, and thus, can be used for expanding the business.

On the other hand, the interest rate on limit facilities is charged only on the amount used by the user, which most of the time is utilized to full. So in the end, you pay a flat ROI.   Here we can simply reduce our interest by half by converting limits into a term loan.

As we know in term loans one has to pay monthly EMI which includes a certain amount of price and interest, and in the limit, we pay principal as per our convenience and interest on the used principal. So here we pay more/ flat interest for the fixed principle in the limit and less interest on the reducing principle in the term loan.

In Limit, we don’t call upon our debtors for the payments and simply use our limits. But in a term loan, we will be forced to call our debtors for your receivables.

Let’s have an example to understand more,

Working capital limit of 2 crores @ 8%

  • Interest paid per year= 1,600,000/-
  • Interest paid in 7 years = 11,200,000/-

 And,

Term Loan of 2 crores @ 8%

  • Interest Paid for 7 years = 6,184,859

Total Saving On Interest= 5,015,141/-

 *MONEY SAVED IS MONEY EARNED*

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