Interest Rate Type
There are two types of interest rates for business loans: fixed interest rates and variable interest rates. If you don’t know the difference between the two, the lender can make that choice. However, borrowing costs vary greatly depending on the type of interest rate applied.
So before you sign a loan agreement, find out what kind of interest rate applies and how it affects your repayment amount.
Prepayment Penalty
Most lenders impose a prepayment penalty if you choose to prepay a business loan. Prepayment clauses are included in the loan agreement, but are often overlooked by applicants. Upfront payment is good if all factors are considered and planned. However, ignoring prepayment penalties can lead to miscalculations, and these hidden costs may outweigh the savings you might have expected from prepaying your loan.
Therefore, please be aware of prepayment penalties and other relevant terms and conditions before entering into any contract.
Penalty
If you fail to pay, you will have to pay late payment charges. During the term of the loan, you may not have sufficient funds to pay the EMI. In such cases, you need to know exactly how much fine you have to pay.
Penalties may be imposed by your lender, so read your loan agreement carefully to see how you will be penalized if you fail to pay. You can use our online business loan calculator to plan your repayment schedule and avoid default. Role of Guarantor
A guarantor may be required to meet the business loan eligibility criteria. Depending on the lender’s terms, the guarantor may be required to repay the loan if the borrower defaults. Therefore, determining the role of the guarantor should be carefully considered by both the borrower and the guarantor before signing the loan agreement.
If you are looking for competitive interest rates, borrow from Vakilsearch. We provide business finance with minimal paperwork and ensure a hassle-free loan process. We offer tools like the Business Loan EMI Calculator to help you consider different repayment options.
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