Taking loans to cover your big-ticket expenses has become quite common among people. Lenders have made loans easily accessible with simple eligibility conditions and minimal documentation requirements. Now, borrowers can complete the entire loan processing right from their smartphone. Easy eligibility, fast approval, and flexible repayment are some reasons why people prefer taking a loan rather than using up their savings.
When it comes to buying a two-wheeler, you can easily find a bike loan at competitive interest rates. However, be wary of the interest rates and EMIs before submitting your application form. A bike loan EMI calculator can help you calculate the EMIs, allowing you to choose a loan term with easy repayment suitable to your budget. Here, you will learn how to evaluate interest rates and EMIs for bike loans.
Why Interest Rates and EMIs Matter?
Interest rates and EMIs are the most important terms you will come across regarding loans. When you take out a loan, you have to repay the borrowed amount along with the interest rates. EMI stands for Equated Monthly Instalments, which you have to pay each month. EMIs consist of some portion of your principal amount and interest cost. As you continue paying your EMIs, you gradually pay off your two wheeler loan throughout the loan tenure. Since the interest rate makes a significant difference in your EMI amount, comparing lenders and choosing the one offering the lowest interest rates makes sense.
Factors Affecting Interest Rates
Different lenders offer varying interest rates on bike loans. They take several factors into account to determine your interest rates. These include the following:
Age: Your age affects the bike loan interest rate to a great extent. If you are pretty close to your retirement, the lender may reject your loan application or charge you a higher interest rate.
Income: Your income also plays a crucial role in determining your interest rates. The higher income you have, the lower maybe your interest rates. However, the lenders also check your debt-to-income ratio to decide your interest rate.
Credit Score: Your credit score is pivotal in determining your interest rate. A high credit score indicates responsible credit behavior, which may help you get a lower interest rate for your two wheeler loan.
Down Payment: Although many lenders offer bike loans of up to 100% of the vehicle’s value, you must consider saving for the highest possible down payment. Making a high down payment means a lower loan amount is required. As a result, you may get easier loan approval at lower interest rates.
Factors Affecting EMI Amount
EMI is the amount you have to pay each month to repay your borrowed loan. These are the factors determining your EMI amount:
Repayment Plan: Most lenders allow borrowers to choose their repayment plan ranging from a few months to several years. A longer loan term means smaller EMIs but a high interest by the loan term-end. On the contrary, a shorter loan tenure means bigger EMIs, but it saves money on the total interest cost. Therefore, using a bike loan EMI calculator is worth it, as it gives you an estimate of your loan EMIs according to the loan term you select.
Loan Amount: Your EMI amount also depends on the loan amount you borrow. The higher the loan amount, the bigger will be the EMIs. That is why it is essential to save for a bigger down payment and borrow minimum.
Interest Rate: Since your EMI amount consists of the principal amount and the interest cost, the higher your loan interest rate, the higher your EMI amount will be. That is why it is crucial to find a lender offering lower interest rates than the others.
How to Calculate Loan EMI
The mathematical formula to calculate your EMI is:
EMI = P × r × (1 + r)n/((1 + r)n – 1)
Here, P= Loan amount, r= rate of interest, and n=tenure in the number of months. However, calculating EMIs manually is complex, time-consuming, and error-prone. Considering this, using a bike loan EMI calculator is a faster and safer method of calculating EMIs. It helps you calculate the EMI amount within seconds. All you need to do is enter your loan amount and interest rate and select the loan term you want to choose. The EMI amount for that repayment term will appear on your screen, and you can adjust your loan term according to your repayment capacity.
Are you looking for a two wheeler loan to purchase your dream bike? Calculate your interest rate and EMIs using the methods mentioned above and make an informed decision to keep loan repayment easy.