Availing MSME loans are absolutely easy these days! With the presence of online finance companies, MSME loan is within everyone’s reach. MSME loans have flexible repayment tenure and terms. Many online lenders also offer MSME loan without security. Additionally, MSME loan eligibility criteria are easy to meet and it is offered with minimal documentation. There are a number of MSME loans schemes for entrepreneurs, manufacturers, traders, and other businessmen that they can avail and take the benefit of.
Having said this, the basic nature of a business is uncertainty and therefore, there are times when an MSME has surplus cash. In such a scenario, it may wish for the pre-closure of the business loan, i.e. repay MSME loan before its tenure. This prepayment can be done by either paying the entire outstanding payment before the loan’s tenure or making a part payment before its due date (payment of EMI before its due date). Prepayment of business loan is done basically to save on interest costs.
Let’s learn about the two benefits of closing the MSME loans early.
MSME loans come with the interest, obviously! If you wish to foreclose and repay the outstanding MSME loan amount, you can save a significant amount of money that otherwise was to be paid as interest. It is pertinent to mention that even if you have availed a loan for MSME at the lowest interest rate, you still save some money on interest if you foreclose the business loan account.
No Foreclosure Charges
If you wish to foreclose your MSME loan account, you would obviously save the amount which was to be paid as interest. While this is your saving, on the flip side, this is a loss on the part of the lender. So, in order to discourage the borrower to foreclose the loan account, they levy certain charges on foreclosing the business loan account.
These charges cover the loss that the lender would otherwise be suffering. However, the benefit here is that there are some lenders, such as ZipLoan, who does not levy any foreclosure charges on the early closure of the MSME loan account.
So, it is imperative for the borrowers to have availed the MSME loans from such lenders who do not charge a penalty on early closure of the loan account.
It is also imperative for the business to foreclose loan account only if it will not affect the cash flow of the business. In case, the foreclosing loan account leads you to take another loan, opting for pre-closure does not make any sense. So, it is important to do the math properly and decide wisely to either go for the business loan or not. Additionally, the foreclosure of MSME loans also depends on the terms, conditions, and situations which differ from one business to another.