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5 Tips to Prepay Your Two-Wheeler Loan Amount

5 Tips to Prepay Your Two-Wheeler Loan Amount

Indians love their two-wheelers! They make for an affordable purchase, are fuel-efficient, allow you to zip past congested city roads and whatnot. Besides, thanks to easy two-wheeler loans, you don’t need to worry about the price.

Although you do need to think about paying your EMIs, or more importantly, prepaying them to close the loan faster.

What Is Bike Loan Prepayment?

Some lenders in India offer borrowers a prepayment feature, meaning they can repay their entire loan amount before its pre-defined tenure. You can prepay your loan for a bike in full or parts depending on your situation.

Loan prepayment is a way to close the loan faster. You also end up paying less overall interest than stipulated.

Pros and Cons of Bike Loan Prepayment: Should You Pay Early?

Deciding whether to make a bike loan prepayment requires weighing the benefits against potential drawbacks. Prepaying your loan can help you save on interest and shorten the repayment period, but it’s essential to understand the implications before making an early payment. 

Here’s a quick look at the pros and cons:

Pros of Bike Loan Prepayment:

  • Interest savings: Paying off your loan early reduces the overall interest liability.
  • Faster loan closure: You can become debt-free sooner than scheduled.
  • Improved financial flexibility: Lower outstanding debt can free up funds for other financial goals.
  • Convenience: Most lenders allow bike loan payment online, making prepayment easy and accessible.

Cons of Bike Loan Prepayment:

  • Prepayment charges: Some lenders may levy fees for two wheeler loan prepayment.
  • Opportunity cost: Early repayment might limit your ability to invest surplus funds elsewhere.
  • Partial benefits: Not all early payments significantly reduce the interest if made late in the tenure.

Weighing these factors will help you decide if bike loan prepayment or sticking to regular bike loan repayment is better for you.

Tips for Effective Two Wheeler Loan Prepayment

Do you want to settle your two-wheeler loan amount? Prepay it by adhering to the following:

1. Budget Monthly Expenditures

You don’t have to curb your lifestyle aggressively. Instead, don’t compromise on your needs, but modify your wants.

Slightly modifying your lifestyle will leave you with surplus funds, which you can use to prepay the loan. By doing this, you won’t need to stop saving or break an FD to foreclose your loan early.

2. Consider Refinancing

Even a difference of 0.5% to 1% in ROI can make a huge difference if you want to prepay your loan. Therefore, to close your bike loan amount, prepay it faster by refinancing your loan with another lender.

Refinancing means shifting your instalments to another lending institution as they are willing to provide you with a lower two wheeler loan interest rate. A lower ROI means you’ll have significantly less amount payable.

3. Try Automated Payments

You won’t be tempted to spend extra funds if you have standing instruction to pay EMIs. In fact, specific lenders may also provide you with a small discount for assuring monthly loan repayments.

If you already have a standing instruction in place, try increasing its monthly limit to close the loan quickly.

4. Negotiate a Bi-Weekly Payment Model

Consider negotiating a bi-weekly payment model instead of waiting an entire month to pay your EMIs. Paying twice a month can help you finish off your loan quickly. Moreover, accelerated bi-weekly payments will also help combat the compound interest on your loan.

5. Round Off Monthly Payments

Rounding off your odd amounts can make a real difference when it comes to bike loan prepayment. For instance, if your EMI is Rs. 3,500 per month, always pay Rs. 4,000. The extra contribution of Rs. 500 per month compounds to an additional payment of Rs. 6,000 annually.

How to Make Online Bike Loan Prepayment: Step-by-Step

Making your two-wheeler loan prepayment can save interest and help you close your loan sooner. Follow these steps for a smooth bike loan prepayment process:

  • Step 1: Check your loan agreement for any lock-in period before initiating bike loan repayment.
  • Step 2: Contact your lender to understand the procedure and prepayment charges.
  • Step 3: Log in to your lender’s portal to process the bike loan payment online.
  • Step 4: Confirm the payment and retain the receipt.
  • Step 5: Collect the NOC as proof of loan closure.

That’s it. All it takes is five easy steps to make your bike loan payment online.

Mistakes to Avoid During Two Wheeler Loan Prepayment

Prepaying your loan can be smart, but a few missteps can reduce its benefits. Keep these in mind before proceeding with two wheeler loan prepayment or bike loan prepayment:

  • Ignoring prepayment or foreclosure charges mentioned in your loan agreement.
  • Not checking whether bike loan payment online updates the outstanding principal correctly.
  • Prepaying without confirming how it impacts tenure, EMI, or total interest.
  • Forgetting to request a revised statement after bike loan repayment.
  • Overlooking the timing. Prepaying very late in the tenure saves little interest.

Conclusion

Use these actionable tips to prepay your loan faster.

Have you already repaid your previous loan for a bike and want another? Choose a lender that offers affordable interest rates at comfortable tenures with a prepayment facility.

Partner with Tata Capital for excellent ROIs, flexible repayment terms and a prepayment facility to help you close your loan faster.So, if you want to file for a new loan or refinance your current loan, calculate your potential EMIs using our two-wheeler loan EMI calculator, and apply right away!

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FAQs

Is it good to prepay a two wheeler loan or continue normal EMI repayment?

Whether it's good to make a two wheeler loan prepayment depends on your finances. It can help reduce interest while limiting your ability to invest funds elsewhere. Consider bike loan payment online only after assessing the pros and cons.

Will I be charged a prepayment penalty for early closure of my bike loan?

Yes, some lenders charge a prepayment or foreclosure fee on bike loan prepayment. It’s best to check your loan terms before early bike loan repayment.

Does prepaying my bike loan improve my CIBIL/credit score?

Yes, bike loan prepayment can improve your credit score by lowering your debt and showing responsible behaviour. This is especially true when done through timely bike loan payment online.

What’s the difference between part-prepayment and full foreclosure for a bike loan?

Part-prepayment reduces the outstanding amount during bike loan repayment, while full foreclosure closes the loan entirely. Bike loan prepayment charges and interest savings differ for both options.

Can I make bike loan payment or prepayment online?

Yes, most lenders allow bike loan payment online through net banking, mobile apps, UPI, or their customer portal, including regular EMIs as well as part-prepayment or foreclosure.

What documents should I collect after prepaying or closing my bike loan?

After two wheeler loan prepayment, collect the loan closure letter, No Objection Certificate (NOC), updated loan statement, and RC hypothecation removal confirmation to ensure the loan is officially closed.

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