Earlier, people spent months saving up to finance their dream bikes. However, today, with the easy availability of bike finance options, this waiting period has been eliminated. With banks and NBFCs offering attractive loan terms to customers, buying a bike on EMI has become not just easy but also a financially prudent choice. Opting for bike finance plans doesn’t just shield your savings from one-time upfront payments, but also helps improve your credit score.
However, before you avail of a two wheeler loan, there are a few crucial things you will need to consider. Apart from the principal sum and interest rate, you also need to ascertain the tenure of the loan and estimate your EMI payments. While most potential borrowers tend to use online bike EMI calculators to compute their EMI liabilities, they forget that the tool can also be used to determine a favourable loan tenure. Thus, if you’re confused about picking a repayment duration for your bike loan, here’s a comprehensive guide that will help you get started:
What is bike loan tenure and why is it Important?
Bike loan tenure is the time period within which you must repay the loan amount, along with interest accrued on the sum over this duration. While different banks and NBFCs have different tenure specifications, most range from 3 months to 3 years. Only a few lenders offer bike loans with a 5-year repayment term.
The tenure of your two-wheeler loan determines how easily you can pay it back and its overall impact on your finances. Simply put, your bike loan tenure is important because it directly affects the applicable interest rate and your EMI payments. This is how your bike loan tenure affects both these two-wheeler loan aspects.
- Your Interest Rate: Since a longer tenure means greater risk for the lender, you could be looking at a hiked rate of interest. Alternatively, a shorter tenure means lowered risk exposure; thus, you can expect a lower rate of interest. However, you should remember that factors like age, income, area of residence, etc. also play an important role in determining your bike loan interest rates.
- Your EMI Payments: A shorter tenure means that you will have to pay high EMIs. However, a longer tenure means that you can pace out payments to avoid high monthly installments.
How can a bike EMI calculator help?
As mentioned earlier, potential borrowers often use bike EMI calculators to estimate their EMI payments. However, this ingenious digital tool can also be used to compute the EMI and total interest payments for a bike loan. A bike EMI calculator uses parameters like your principal sum, loan tenure and interest rate to compute these values. You can access this tool online free of charge to run multiple simulations and identify the best loan duration as per your financial situation. Using a bike EMI calculator helps you ascertain a tenure such that the EMI payments fall well within your affordability threshold.
Let’s take an example to understand how bike EMI calculators compute your interest and EMI payments. Say, for instance, you borrow a sum of ₹1 Lakh at 11% p.a. to finance your brand-new two-wheeler. Now, since you have no existing debts, you choose to repay the loan within a tenure of one year. To compute your EMI amount for this period, you simply need to fill in this information in the corresponding fields of the bike EMI calculator. Accordingly, the calculator will display your EMI amount as ₹8,838 and the total interest payable as ₹6,056. If you opt for a term of three years, you need to increase the tenure from one to three, keeping all other fields constant. Accordingly, the bike EMI calculator will compute your monthly installments as ₹3,274 and the total payable interest as ₹17,864.
Thus, it can be deduced from the above example that a longer repayment tenure lowers your EMI burden to less than half but also simultaneously doubles your interest burdens. In this way, you can run multiple loan tenures, principal amounts and interest rate combinations to find an EMI amount that falls within your budget.
What are the various bike loan tenure options?
One-year tenure
If you have a stable source of income without any existing loans or overburdening credit card liabilities, a one-year tenure may be your best bet. Your EMI payments remain quite sizable for bike loans with a one-year tenure; however, the applicable interest rate remains low. As such, you get to save on interest payments in the long run and transfer the ownership of the bike to your name in just 12 months.
Two-year tenure
A two-year tenure strikes the precise equilibrium between affordable interest rates and EMI expenses. This tenure allows you to repay the bike loan relatively quickly without being overburdened by interest payments. Given the perfect balance of this tenure, it remains the most popular option among middle-class borrowers.
Three-year tenure
Opting for a three-year repayment tenure will help reduce your monthly EMI burdens quite significantly. However, it will lead to a sizable interest build-up in the long run. This tenure is suitable for those with existing debt liabilities that need liquidity to finance other monthly obligations.
While most banks and NBFCs offer tenures ranging up to 3 years, a few offer 4, even 5-year-long bike loans. However, opting for such long repayment tenures will have the same results as a 3-year tenure. You can easily bypass such confusion about bike loan tenures by using a bike EMI calculator.
Is there an ideal bike loan tenure?
The simple answer to this question is no. In this case, the one-size-fits-all approach is redundant as the ideal tenure for a bike loan depends on the borrower’s financial status and preferences. For instance, shorter repayment tenure may be a prudent choice if you have enough funds and can afford to pay higher EMIs. However, a longer tenure may be a wiser choice if you have existing financial commitments. You can use a bike EMI calculator to figure out your ideal tenure in a matter of seconds.
Summing it up
While you can get up to 5 years to repay your bike loan, spending some time deliberating on the right repayment tenure may be prudent. Both long and short repayment tenures have their own pros and cons, which need to be carefully assessed before making a call.
You can avail of a bike loan from a trusted lender like Bajaj Finserv and enjoy affordable rates starting from just 9.25% p.a., along with a flexible repayment tenure of up to 3 years. Additionally, to ensure that this loan’s tenure doesn’t overstep your affordability threshold, you can use the bike EMI calculator available on Bajaj Markets.
