A Chartered Accountant loan, as is quite clear from the name, is a professional loan or a business loan for qualified CAs. When availing any debt instrument like a Chartered accountant loan, the applicant needs to factor in the three most important aspects of the loan. They are- the amount to be borrowed, the rate of interest and the tenure of repayment. The amount to be borrowed is to be decided upon by the applicant based on the purpose of utilization and the type of needs to be fulfilled. The rate of interest is a matter of the policies of the lending institution and is not really in the hands of the borrower. The tenure of repayment is to be decided upon after due consideration as it can either make repayment of the loan easy or a financial burden for the applicant. Read on to find out how to make your repayment of the CA loan easy on your pocket.
It is common knowledge that the tenure of the loan and the EMI to be paid have a reverse relation- longer the tenure, smaller is the EMI to be paid every month and shorter the tenure of repayment, the EMI value becomes higher. Opting for a longer tenure might seem like a better choice as a smaller amount goes towards servicing the CA loan availed each month, but in the long run, the applicant ends up paying more through the interest.
For those individuals who have long term plans that might need an investment later, a shorter tenure will help in clearing up the dues faster, thereby making room for taking up newer projects requiring funds. Here, the monthly income and the expenses should be evaluated in order to determine how much money can be set aside for the loan EMI.
Many banks and Non-Banking Financial Companies (NBFCs) provide the option of part prepayment on Chartered Accountant loans for those situations when the applicant can pay multiple EMIs together with any surplus funds in hand.
Generally, lenders require a minimum of 3 EMIs to be paid through part prepayment. This helps in reducing the amount owed to the lender.
Also Read: How Loan Tenure Impacts Repayment of Your Chartered Accountant Loan
Since loan seekers tend to think about the tenure much after the interest rate and the lender- so, choose your lender wisely after weighing in the cost of borrowing and the benefits and features provided with the CA loan and the tenure of repayment.
Aman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management.