Investing in a commercial property can be a financially rewarding endeavour. However, if you’re planning to finance this purchase with a commercial property loan, it is important to understand your potential EMIs to manage the repayments comfortably without any financial strain. This is where a commercial property loan calculator comes in. It helps you determine the potential EMIs you’ll have to pay over the loan tenure so you can make informed decisions about your commercial property investment.
What is a commercial property loan calculator?
A commercial property loan calculator is a digital tool that helps you calculate the potential EMIs of your commercial property loan. By simply entering details such as the loan amount, interest rate, and loan tenure, you can quickly and accurately calculate your EMI amount.
How does a commercial property loan calculator work?
The following is a simple formula to calculate the monthly EMI:
EMI = PR(1+R)^N/((1+R)^N-1)
Where EMI is equated monthly instalments, P is the principal amount, R is the rate of interest and N is the tenure of the loan in months.
This formula gives you the exact amount of loan EMI you will have to pay every month.
One can also use the following link to calculate their EMI on a loan against commercial property:
https://www.tatacapital.com/loan-against-property/emi-calculator.html
There are several benefits of having this calculator handy. Let’s have a look at some of them in the next section.
Factors affecting commercial property loan EMI
Several factors influence the EMIs of a commercial property loan. These include:
– Loan amount: The principal amount you borrow directly impacts the EMI. A higher loan amount results in higher EMIs.
– Interest rate: The interest rate affects the overall loan repayment amount. Lower the interest rates, lower the EMIs.
– Loan tenure: Longer tenures result in lower EMIs, while shorter tenures lead to higher EMIs.
– Credit score: A higher credit score can help you secure lower interest rates, reducing your EMIs.
Eligibility, interest rates, and documents required for commercial property loans
The interest rates for a commercial property vary from lender to lender and depend on various factors, such as the lender’s policy, your credit history, income, etc. It typically ranges between 8% to 12%.
To be eligible for a commercial property loan, you must meet the following criteria:
– You must be an Indian resident
– You must be salaried or self-employed
– Your business must have been in operation for up to 3 years.
Here are the documents you must produce to apply for a commercial property loan:
– Identity and address proof: Aadhar card, driving license, voter ID, passport, etc.
– Income proof: Last three years’ ITR or balance sheets and P&L account, current account statements for the last 6 months, etc.
– Business ownership proof: A copy of the Builder Buyer Agreement and Title Deed.
Benefits of using a commercial property loan calculator
The following are some of the benefits of using a commercial property loan calculator:
– Helping with Financial Planning: Having the loan calculator helps in knowing the EMI amount, which helps with managing the cash flow and in turn helps in planning for the amount needed to set aside for repayment of loan.
– Quick and Easy Calculation: Having a commercial property loan calculator helps save time as the EMI amount is presented almost instantly. If the same calculation is done manually by a person excellent in mathematics it will take at least 30 minutes to come up with the EMI amount.
– Accuracy: A loan calculator provides better accuracy than manual calculation and that too within seconds.
– Helps in Knowing Eligibility: The loan calculator helps you in knowing the exact EMI amount, and you can easily determine whether you would be able to pay the EMI as per your current business situation and cash flow.
Benefits of getting a loan against commercial property
Some of the benefits of getting a loan against commercial property are:
– Low Interest Rates: Interest rates for commercial properties are typically lower than those for residential properties. This is due to the ongoing business activity associated with commercial properties, which generates a steady cash flow. As a result, lenders view commercial properties as a more secure investment compared to residential properties.
– Easy Application Process: Applying for a commercial property loan is relatively easy with lesser paperwork and hassles when compared to a residential property loan.
– Tax Benefits: If you are buying a property for commercial purposes, the amount incurred for repayment of the loan is deductible as per Section 24 of the Income Tax Act, 1961.
– Reduced Risk: These loans are for an extended tenure with lower interest rates and are mostly unsecured, i.e., you do not have to provide collateral against the loan hence these provide a comparatively less risk exposure.
Drawbacks of getting a loan against commercial property
Some of the drawbacks that should be kept in mind while applying for a commercial property loan are as follows:
– Difficulty for First-time Business Owners: Becoming eligible for a commercial property loan is very difficult for first-time business owners as they require to build credibility first before applying for a loan.
– Less Autonomy: Oftentimes, with larger loan amounts, the lenders require more details on how the money will be spent and then they influence the decision-making by keeping their interest in mind concerning the loan amount. This eventually proves to be detrimental to the business owners as they have to always conduct business with a major focus on repayment of loan EMI.
Conclusion
In conclusion, the commercial property loan calculator, such as the loan against property calculator by Tata Capital, serves as a valuable tool for prospective borrowers in assessing their financial obligations and planning for successful property investments. By offering quick and accurate estimations of monthly payments, interest costs and loan tenures, this calculator empowers individuals to make informed decisions and navigate the complexities of commercial property financing with confidence.
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FAQs
To know the exact EMI amount, all you have to do is input the loan amount, interest rate and tenure of the loan. The calculator gives you the EMI amount in seconds.
The commercial property loan calculator gives the amount of EMI that will have to be paid every month. The major benefit of this calculator is that since you already know the EMI amount beforehand, you can make an informed decision on how much cash outflow you will need to make every month to pay the EMI. This will help you manage the finances of your business structurally.
Major things to consider should be the loan amount that you will need, the interest rate and the tenure to repay the loan amount. Having these things ready with you shall help you use the calculator effectively, which would give you the EMI amount as an output.
As explained above, the loan calculator helps you with financial planning, it is a quick and easy way to calculate the EMI, is very accurate and finally helps you determine the eligibility for the loan by giving you the EMI amount.
Interest on a commercial property loan can be deducted as a business expense in India, reducing taxable income. Any income from the property is subject to tax.
To obtain a commercial loan, approach banks or NBFCs with documents like business financials, property details, and income proof etc. Approval depends on creditworthiness, loan amount, and property value and other relevant factors.
06 November 2024
6 mins read
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