Before availing a two-wheeler loan, one needs to be aware of the amount invested. For that, you can calculate EMI for bike loan with the bike loan interest rate calculator. But if you want to know how to calculate EMI for bike loan, the blog will simply make the complicated calculation and provide some tips and tricks to calculate the EMI for bike loan. Whether you are an experienced cyclist or a new bike owner, L&T Finance helps you with down-to-earth tips, tactics, and the know-how to make an effortless and financially safe choice.
What is a Two-wheeler Loan? A two-wheeler loan is the financial solution for the borrower so that he or she can purchase a two-wheeler and pay for it in instalments instead of paying a huge upfront amount. To understand the importance of this loan, L&T Finance offers flexible options for those seeking to hit the road on their two-wheeled companions.
How to Calculate EMI for Bike Loan? The equated monthly instalments or EMI for a two-wheeler loan can be computed in order to know the kind of financial liability it involves. You can compute the same manually, as well as through an online bike loan EMI calculator.
Bike Loan EMI Calculation Manually
Bike Loan EMI = [P*r*(1 + r)^n]/[(1+r)^n–1]
In this equation, P is the principal loan amount, and R is the rate of interest per month (annual rate divided by 12). N is the loan tenure in months. Calculating your EMI amount ensures financial preparedness throughout the loan tenure. On the other hand, an EMI calculator is an online tool, also known as a bike loan interest rate calculator, that simplifies the process and provides an accurate result.
Using a Two Wheeler Loan EMI Calculator?
So, how to calculate EMI for bike loan, using the Two Wheeler Loan EMI Calculator? The process is simple: enter the loan amount, mention the interest rate, and select the loan tenure. The calculator gives instant accurate Equated Monthly Instalments (EMIs), giving a clear view of the financial burden. L&T Finance has an online EMI calculator on its official website where customers can easily calculate their monthly repayment liability by entering their respective loan details.
Advantages of Using Bike Loan Interest Rate Calculator
There are several advantages of using a two wheeler loan EMI calculator to calculate the EMI for a bike loan. Some of them are mentioned as follows:
• Accuracy: This is an accurate tool that ensures the accuracy of the calculations.
• Speed: It works much faster than all other manual calculation methods.
• User-friendly: It is easily used by everyone, even for the first time borrowers.
Other than this, the two wheeler loan EMI calculator gives the prospect borrower an understanding of how best one can get the deal of loan. By applying all sorts of permutations and combinations regarding the loan tenure and amount at a given applicable rate of interest, one receives the total repayable amount.
For instance, a larger downpayment reduces the principal amount and, thereby, the total amount to be repaid. Similarly, with a longer tenure, you would have more monthly payments but, in turn, might end up with a smaller interest rate. When you plug in these values differently in the EMI calculator, it shows all the different amounts payable in every scenario. From there, you can pick what works best for you.
Once you have reached a financially viable combination of loan amount, loan tenure and interest rate, you can look at further options to lower your repayable amount. One essential way to achieve this is to get a low interest rate on your bike loan. Let’s find out how you can do it.
Factors Affecting Two-wheeler Loan Interest Rates
Your interest rate depends on multiple factors. Some of them are:
• Creditworthiness
The creditworthiness of the borrower is of significant importance when it comes to the rate of interest on a two-wheeler loan. Credit score and credit history determine it. A good credit score can be anywhere above 700 points. Further, a good financial history, that is, regular and timely bill payments, EMI payments, and credit card payments, can strengthen your financial profile.
• Debt-to-income Ratio
The debt-to-income ratio indicates your financial burden compared to your monthly income. A higher debt-to-income ratio suggests that you may have less money to repay a loan, and you may face a higher rate of interest. To keep your debt-to-ratio in balance, pay off any existing debts or avail of a debt consolidation facility to lower your debt.
• Relationship with the Lender
Your relationship with the finance company makes a lot of difference as the company can offer you a preferential interest rate if you have maintained a good relationship with them.
• Type of Interest Rate
Except the reasons mentioned above, do check for interest rate type. A borrower willing to take all the risks shall opt for the floating interest rates that will provide him with leverage of market drifts. Instead, a person that wants stability for his loan term can opt for the fixed interest rates. Moreover, a fixed rate of interest could be beneficial during short tenors, whereas one might opt for a floating interest rate in cases of longer terms.
Factors Which Impact Two Wheeler Loan Interest Rate.
The financial institutions critically review the applicant’s profile while rolling out a loan deal. Depending upon the applicant’s repayment capacity, determined by various aspects of the financial profile, the loan amount, loan tenure, and rate of interest are fixed. So, if one has maintained an excellent financial profile, it may be possible to avail of the lowest two wheeler loan interest rates. These are the factors that one must consider:
Credit Score Credit score combined with a good credit history acts as a necessary criterion for finalizing the rate of interest that will be required for two-wheeler lending. A high credit score rating of 700 or 750 can help them get the two-wheeler loan at low interest rates.
Age As age is reflective of the age of repayment it is possible in case the applicants are nearing old age, thereby increasing the level of interest of the loan
Employment at a respected company may signify stable employment and regular income. This will assist the applicant to obtain a two wheeler loan with low interest rate.
Monthly Income Banks normally offer varying two wheeler loan interest rates for salaried and self employed individuals. There is also a minimum income requirement in the eligibility section, which must be satisfied by the applicant.
History with Lender In a positive relationship, such an applicant stands a chance to achieve a low-interest two-wheeler loan, if with any lender whom she or he knows.
There might be many other criteria that aren’t in an individual’s hand but still it has some: build a healthy relationship with any financier, score more, a stabilized income will result in high interest-free borrowing capability.
One of the ways to get a two wheeler loan with low interest is by enhancing one’s financial profile. Here are some other ways to get a better loan deal.
Larger Down Payment Paying more in the down payment for the two-wheeler will decrease the principal amount and, in turn, lower the total repayable amount.
Shorter Loan Tenure Some financial companies may offer lower interest rates on shorter loan tenures as the risk to the financial company reduces. However, despite a lower interest rate, a shorter loan tenure will increase the EMI amount compared to a longer tenure.
Better Debt-to-income Ratio The debt-to-income ratio is crucial in determining the loan amount. Paying off ongoing loans and credit card debts helps improve the applicant’s chances of getting a higher loan amount at lower two wheeler interest rates.
Before applying for a two-wheeler loan, applicants can get an idea of the loan amount they are eligible for. Further, it is also possible to find out the probable EMI by choosing a comfortable loan tenure and interest rate. An EMI Calculator can help with this.