Ways to Reduce the Interest Rate on Your Commercial Loan
There may arise various situations where small businesses may seek to avail a commercial loan. Whether an emergency or a general need, these loans can be exceptionally helpful in all cases.
Some of the ways businesses can utilize these loans include:
● Purchasing, upgrading, or repairing plant & machinery
● Purchasing raw materials
● Restocking inventory
● Leasing a new office space
● Increasing working capital
● Expanding operations to a new location, etc
Commercial loans are also disbursed rapidly; hence, business owners have quick financing option in hand to meet cash crunches.
Although these loans bear various benefits, the interest rates can become a burden for you as they are unsecured. However, you and your small businesses get several options to reduce the interest rates.
1. Improve your credit score
Improving your credit score is of the ideal ways to get attractive commercial loan interest rates. Lenders always prefer customers who have a CIBIL score of 750 or above. A score makes you more creditworthy for an unsecured loan.
How to improve?
I. One of the fastest ways to improve your CIBIL score is by availing a credit card. Go for a secured credit card provided against an FD is you have a low score.
II. Pay your credit card bills and loan EMIs in due time.
III. Always pay the total amount due in your credit card bill. Paying the minimum amount will lower your score.
IV. Never use more than 30% of your credit limit.
V. Refrain from applying for multiple credits at a time. A lender will make an inquiry for your credit score each time you apply for a loan. Each query will lower your credit score, and multiple ones can have a drastic impact.
2. Make sure you have a robust business plan
You may need to make a great business plan to avail a business loan. Making sure that it is robust and fool-proof is vital as lenders will consider your business plan for approval.
Provide all necessary information in the plan – current and future financial projections, marketing strategies, expansion plans, the loan amount you are seeking, the objective of your loan, etc. A good business plan can play a significant role in getting the most attractive interest rates.
3. Opt for a Flexi Loan facility
Bajaj Finserv also offers Flexi Loan facility. A Flexi Loan can be the ideal way to meet your working capital needs. You only have to pay interest on the amount that you withdraw from the pre-sanctioned limit. Moreover, you can choose to pay only the interest as EMIs. You can repay the principal at the end of the loan tenor.
4. Business vintage and other eligibility criteria
Leading financial institutions prefer businesses that have a minimum business vintage of 3 years. In addition to that, fulfilling the other eligibility criteria may help you receive lower rates of interest.
Bajaj Finserv also provides pre-approved offers with their commercial loans. You only have to give your name and phone number to take a look at your pre-approved offer.
5. Refinance your loan
You can opt for refinancing to reduce the interest rates if you have already availed a loan. Refinancing is the process of taking a loan with lower interest rates to repay another one with higher rates.
Many a time, it may so happen that one lender offers you a lower rate of interest than your current lender. Hence, in such situations, you avail this new loan and foreclose your current one.
However, do remember that your current lender may charge a fee when you foreclose the loan.
The following can help you immensely to reduce your commercial loan interest rates. Also, make sure to provide all the necessary documents and fulfill the eligibility criteria to make sure your loan application gets approved.