Guide To Calculate Monthly EMI For Bike Loan

In India, two-wheelers such as motorcycles and scooters are extremely popular due to their cost-effectiveness, high fuel efficiency, and minimal maintenance requirements. These vehicles are well-suited for Indian conditions, including rough roads and heavy traffic, making them a practical choice for daily commuters. However, owning a two-wheeler can be costly and often requires a substantial amount of money upfront. It can be challenging for individuals without adequate savings or cash reserves. That’s why a majority of Indians – around 75% – rely on external financing options such as acquiring a two-wheeler loan to purchase their desired vehicle.

These loans allow individuals to pay for the two-wheeler over time, instead of all at once. It makes the purchase more manageable and affordable, and allows customers to maintain their savings in the account. In this way, a two wheeler loan can be a suitable solution for those looking to purchase a bike without having to dip into their cash reserves.

Two-wheeler loans and interest rates

Two-wheeler loans are typically secured, with the vehicle itself serving as collateral. Due to the collateral, these loans tend to have lower interest rates than unsecured loans. In India, individuals can seek bike loans from banks, non-banking financial companies (NBFCs) and captive financing companies. When taking out a bike loan, the interest rate can vary greatly, from as low as 6.85% to as high as 28%. This rate is determined by factors such as the borrower’s age, employment status, credit score, and existing debts.

Furthermore, the interest rate directly impacts the monthly EMI. Additionally, borrowers have the option to choose between a fixed or floating interest rate. A fixed rate means the interest rate remains constant throughout the loan term, providing predictability in monthly EMIs.

For example, If you choose a fixed interest rate of 12% per year, it will remain unchanged throughout the loan period. On the other hand, a variable interest rate, also known as a floating interest rate, is affected by market forces. Depending on market movements, it can be less than or greater than the fixed interest rate. Due to the uncertainty that a variable interest rate can bring, most customers tend to opt for a fixed interest rate. It gives them the clarity of knowing their EMI throughout the loan term.

Repayment Period or Tenure

The repayment period or loan tenure is the length of time over which the borrower agrees to repay the two-wheeler loan. It is an important factor to consider when taking out a loan, as it can affect the overall cost of the two-wheeler. Most banks offer flexible repayment periods and loan terms ranging from 12 to 36 months, while NBFCs offer longer periods of up to five or even seven years to repay the loan amount.

Typically, a shorter loan term has a higher interest rate and monthly payments, making it suitable for individuals who can afford higher payments and have a shorter repayment horizon. On the other hand, a longer loan term may have lower monthly payments and interest, but can lead to a higher overall cost of the vehicle. This makes it appropriate for those who want lower payments but can afford to pay more in the long run.

When selecting a two-wheeler loan, it is important to choose a repayment period that is in line with your financial capabilities and won’t cause undue stress on your monthly budget. Opting for a manageable repayment period will help you in the timely payment of the EMIs, and avoid any default and its consequences. Therefore, it is advisable to consider your earnings, expenses and other liabilities before choosing the loan tenure.

Downpayment

When applying for a two-wheeler loan, besides considering the interest rate and repayment period, it is important to be mindful of the down payment required by the lending company. The down payment is the initial payment made by the borrower towards the cost of the vehicle, which can vary depending on the lender’s policies. Some lenders may require the borrower to pay a percentage of the vehicle’s on-road price, usually in the range of 15-30%, as a prerequisite for loan approval. A larger down payment can decrease the amount you have to borrow, and therefore, the interest you will pay will be less.

On the other hand, other lending companies may offer financing of up to 100% of the vehicle’s on-road cost. This means that the borrower would not have to make any down payment. However, such loans may come with higher interest rates, longer repayment periods, or additional fees.

Benefits of a Bike EMI Calculator

A bike loan EMI calculator can help you determine the amount you will need to pay each month on your two-wheeler loan. You can easily access these calculators online from lenders’ and loan aggregators’ websites. They are designed to be user-friendly and straightforward, as they typically take into account the loan amount, interest rate, and loan term. A bike loan EMI calculator also provides a clear and accurate estimate of the EMI. It is a great tool to help you plan your budget, and ensure that you can make all your payments on time.

Some bike loan EMI calculators also provide the option of including a down payment amount when calculating the EMI. This feature can be helpful, because it allows you to input the amount you can pay upfront, thus reducing the overall loan amount. It also allows you to make a more informed decision while comparing different EMI options, based on varying interest rates and loan tenure.

Manual Calculations

To calculate a two-wheeler loan manually, use the formula given below. It will provide you with the monthly payment required to repay the loan, with the given interest rate and loan amount over the repayment period.

EMI = P x R x [(1 + R) N / ((1 + R) N – 1]

The letter P represents the principal or initial loan amount, R represents the monthly interest rate, and N represents the monthly instalments required to repay the loan.

While you can calculate bike loan EMIs using this formula, it can be a tedious process for some. Using an online bike loan EMI calculator is always a more efficient and accurate option. The calculator can provide immediate results by simply inputting the principal amount, interest rate, and loan term, making it a faster and more convenient option. It eliminates the need for complex calculations and saves time, thus helping you decide the best loan repayment terms per your repayment capacity and budget. Once you have found the best loan repayment terms, you can apply for a bike loan online by visiting Bajaj Markets.