When availing bike finance for your desired two-wheeler purchase, it is always ideal that you assess what expenses lie ahead towards loan repayment. Lending institutions have thus designed dedicated financial tools like bike loan EMI calculator that allow you to estimate the monthly instalments that you would need to pay towards complete loan repayment. These tools also indicate other factors that would impact your borrowing decision like the total interest payable and complete loan liability payable by you along with amortization schedule indicating a principal plus interest component for each EMI amount.
More to that later though. When availing a bike loan, it is important that you know the factors affecting your repayment liabilities so you can make the necessary tweaks to secure favourable terms on your loan, especially EMIs that fit your budget while minimising interest pay out. Let’s check out some of the crucial factors that can impact the EMIs you would pay for your bike loan for east optimisation of your monthly repayment liabilities.
Loan Amount Selected
If you have ever availed a loan for big-ticket financing, it should be easier to understand that the EMIs you end up paying vary as per the loan amount availed. Alternatively, too, understanding that your monthly repayment liability variation as per the loan amount availed is not much difficult.
For instance, the EMIs payable for bike finance of Rs.70,000 for 2 years is going to be automatically lower than EMIs payable for a loan of Rs.1 Lakh availed for the same duration. It is thus important that you select a bike model and choose a loan amount whose repayment can easily fit in your monthly budgets without straining your finances.
Type of Bike Loan
Bike loans are commonly available under two types depending on which the EMIs you would need to pay will vary. Given below are both with a detailed explanation.
Traditional bike loans
Under a traditional two-wheeler financing arrangement, you need to make a down payment first. Whose minimum value varies based on the lender and bike seller requirements. The remaining cost of bike purchase is thus financed by the lending institution as a Two wheeler loan. In this financing arrangement, since you have already paid a part of the bike’s price as a down payment, the financing value reduces. Thus bringing down your EMIs payable too. The loan arrangement can be suitable for individuals looking for affordable financing of bike purchases based on their budgets.
100% Bike finance
Unlike the previous loan, this financing arrangement allows you to secure the entire cost of your selected bike as loan for easy vehicle purchase. The financing arrangement can be beneficial if you do not have lump sum funding for immediate down payment. However, going for this loan option is suggested only if you are ready to repay the advance at EMIs. Summing up a notch higher than instalments for the previous loan arrangement.
For both loan options, you can easily select a tenure of up to 5 years to make repayments. You can thus select between the two based on your financial standing. And a thoughtful assessment based on computing tools like EMI calculator.
Tenure for Repayment
Like the loan amount, the repayment tenure of the advance also impacts your EMIs, albeit in a different direction. To understand this, you must know that based on the tenure you select, the interest payable varies too. And the time involved stretches or contracts, thus impacting your EMIs.
Thus, if you select a longer tenure, the EMIs payable would reduce although. The total interest payable would increase. Similarly, a shorter tenure means higher EMIs payable but reduced interest charge.
Credit Score of the Borrower
Credit score of any individual impacts his/her creditworthiness and allows. The financial institution to assess risk associated with lending. Lenders ideally look for a credit score of above 700 for agreeing to lenient terms. On the loan, such as reduced rates of interest, longer tenures, smaller EMIs, and the likes. When applying for bike finance, you must thus check your credit score and expect the EMIs payable accordingly, among other loan terms.
In case you are availing traditional bike finance, making higher down payments can reduce. The EMIs payable as well as it brings down the total loan principal. Make sure to meet all eligibility requirements laid down by the lender to negotiate well on the loan terms offered by your lender.