If you aspire to own a bike, a two-wheeler loan can be the financial aid that will help you. While financial institutions and NBFCs such as Tata Capital offer two-wheeler loans that are tailored to suit your pocket, there are conditions that you should have an idea about.
Just because there is a loan that can be availed, don’t think your job is over and rush in to avail the samewithout performing your own due diligence on the contours of the loan. Remember that lenders will approve the bike loan for you provided you satisfy their terms and conditions.
Typically, these include two-wheeler loan eligibility conditions, maximum and minimum amount of loan, two-wheeler loan interest rate, tenure, EMI options, fees and charges, penalties for payment defaults, documentation and prevailing statutory policies. You can know more about these terms here.
While the lenders will let you have the loan on their terms and conditions, the onus is on you to evaluate the terms carefully before you decide to take up the offer. This is essential so that you don’t run into problems in the future and default on repayments. After all, you have to repay the loan along with accrued interest
When we talk about repayment, it doesn’t mean that the lenders would demand the loan repayment without keeping your interest in mind. One of the major aspects of the loan that is vital is the tenure of the loan. The tenure is the time available to you to repay the loan. Typically, lenders allow anywhere between 6 months and 84 months for you to repay the loan. For instance, Tata Capital’s loan tenure for bike loan is a minimum of 6 months to a maximum of 60 months. You can read more about the EMI and tenure here.
This means that you can repay the loan as per your convenience. You can repay the loan quicker if you choose a shorter tenure. On the other hand, you will take a longer time to repay if you choose a longer tenure.
Effect of Tenure on loan repayment
Let’s see what effects shorter and longer tenures have on the repayment of your loan.
Your bike loan is affected by the quantum of loan, two-wheeler loan interest rate and tenure. These three parameters determine the way you repay the loan. Typically, lenders allow you to repay through equated monthly installments (EMI). The EMI includes two components – the repayment of principal amount and the payment of interest. The structure of EMI is such that in the initial stages of the loan tenure the interest component is high and the principal repayment is low. As the months flow by, the interest component reduces and the principal repayment increases. Towards the end of the loan tenure, the interest component is low and the principal repayment is high.Click here to know more about Tata Capital’s EMI Options
Let’s examine this with an example by using the EMI calculator available on the Tata Capital website. For a loan amount of Rs 1 lakh, a two-wheeler interest rate of 10.75% and tenure of 36 months, the EMI comes to Rs 3,262/-. When we change the tenure to 24 months, the EMI is Rs 4,649/-. The EMI calculator also throws up one more result which is the amount of interest paid. In the first case, the amount of interest paid is Rs 17,434/- and in the second case, the amount of interest paid is Rs 11,580/-.
What these figures tell you is that the longer your tenure the higher your interest amount but lower is the EMI and vice versa for the lower tenure.
This is how tenure affects your repayment and you can iterate for various values of the loan amount, interest rate and tenure to arrive at the best tenure that suits your profile.
So, go ahead and make your dream of owning a bike come true with a two-wheeler loan. But a caveat from us is that you should carefully evaluate the terms and conditions of the loan especially the bike loan eligibility conditions and decide on each element and choose the one that suits you best. Further, you should choose the tenure that is most suitable for ensuring repayment comfortably.