Tips and Tricks for Calculating EMIs for a Bike Loan
In the current traffic scenario, convenient transportation is the need of the hour. Although public transportation is the only commuting medium for middle-class people, it usually needs to arrive on time and provide the right services. A bike or two-wheeler is more cost-effective than a car and saves much of your time. A bike takes a minimum amount of time to reach from one place to another because these are easy to run in traffic and can successfully tackle crowds.
Traveling on a bike shortens your traveling time because of the easy navigation and saves a considerable fuel cost. A two-wheeler loan helps you finance the lump-sum expenses of buying a bike. With the help of the bike EMI calculator, you can get an estimate of the monthly expenditure.
If you are planning to purchase a two-wheeler, be it a scooter, bike, or superbike, you must know that it will cost you a fortune. Sometimes, you can only arrange part of the amount at a time. In this case, or in other cases of inability to pay the entire term, a bike loan comes in handy. Although there are different factors involved, like in additional loans, a bike loan fulfills your wishes to ride a bike for daily necessities or adventures.
What is a bike loan?
When a bank or an equivalent entity offers you a bike loan, you are given unsecured credit to purchase a two-wheeler. The loan amount is meant to be repaid in equal monthly installments, or EMIs. You can avail of a bike loan with minimum documentation like a duly signed and filled-out application form, photos, and a valid ID or address proof like an Aadhaar card or a driving license.
You get hypothecation of the vehicle until all your dues are paid in the loan tenure. After you complete the repayment process by paying a fixed amount every month as EMIs, you get possession of your two-wheeler.
Things that Impact a Two-wheeler Loan Interest Rate
Although it is easy to get a two-wheeler loan approved, there are certain factors on which the interest rate depends. This is why the interest rates for a bike loan differ for different individuals. Despite being an unsecured form of loan, bike loans can sometimes decline your loan application because your application or financial status does not meet their standards. After knowing the interest rate against your loan, you can take the help of a bike EMI calculator to get a ballpark figure of your monthly installment amount. Here are the primary factors on which a bike loan interest rate depends-
The Loan Tenure
Each bank offers a different tenure for the bike loan repayment process. A longer tenure means a smaller EMI payment. Please discuss with your lender the maximum tenure period they offer. Generally, the maximum tenure is 60 months, substantially reducing your EMIs. Even if you feel your EMIs are causing financial distress, you can apply for an extension of the tenure.
Your Monthly Income
By knowing your gross monthly income, the lenders can assess your ability to repay the loan and the interest on time. In most cases, the minimum net monthly income that a lender looks for is Rs 20,000–Rs 25,000. Some banks and financial institutions also approve borrowers with a net monthly income of less than Rs20,000. Make sure there is no hindrance in the stable income flow, as a higher monthly income lessens the interest you pay for your bike loan. In the case of superbikes, the monthly salary or income requirement is considerably higher. The required monthly income for getting a bike loan for a superbike can go up to Rs 5 lakh per month.
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Your Income Source
Your source of income is another crucial factor in determining your two-wheeler interest rates. The banks look for a borrower with a stable job, which means a salaried employee. If your bank account gets credited with a fixed salary every month, getting loan approval is comparatively easier for you than for a non-salaried individual. The company you work for is another factor the lenders prioritize.
Non-salaried individuals can also avail of a bike loan. Still, in that case, they must produce some extra documentation like their income tax return papers, bank statements, credit history, etc. If you are non-salaried or self-employed, make sure you repay your credit card bills or debts on time so that it reflects in your credit history.
Your Credit Score
Your credit score, credit history, CIBIL score, repayment plan, and existing debts are pivotal in determining your EMIs. A credit score is a reward you earn with every successful credit card bill payment or debt clearance. The more you timely pay a credit card bill or debt, your credit score increases.
With a good credit score, you can quickly get a loan approval or lower interest rate, even if you are a non-salaried individual.
Can you lower your two-wheeler loan EMI?
You can certainly lower your two-wheeler loan interest rates by practicing the followings-
- Improve your CIBIL score: You can improve your CIBIL score by paying your bills or debts on time. It substantially reduces your interest rates, lowering your equated monthly installments.
- Improve your debt-to-income ratio: The debt-to-income ratio suggests the percentage of your income that goes toward repaying a debt. Suppose your monthly income is Rs 100,000; if you pay Rs 10,000 for a loan, your debt-to-income ratio would be 10%. Usually, a debt-to-income ratio of 21–35% is considered good. A good debt-to-income ratio shows that you have reasonable credit risk and can get a loan faster.
- Negotiation: You are open to negotiating with your lender to provide you with affordable interest rates. When you apply for a two wheeler loan from an existing lender, it becomes easier. Also, with a higher down payment, you can get a better deal on the interest rates.
How Can You Use a Bike Loan EMI Calculator?
Nowadays, every bank or financial institution has a free bike EMI calculator tool that you can use on their website. You can get an estimated EMI amount in the following steps-
- Open the bike loan page on the website, where you can find the EMI calculator tool.
- Enter the loan amount in the first field.
- Enter the interest rate in the following.
- Finally, enter the tenure period.
- Tap the calculate button to get the ideal EMI for the given information in less than 30 seconds.