Bike Loan EMI Calculator: 5 Factors That Affect Your EMI
Naveen Mehta 29 December 2020
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Bikes are undoubtedly the most preferred modes of transportation in India. There are multiple factors that contribute to its popularity. Bikes are not only affordable but can easily help you maneuver through the traffic. This will help you save both time and money. If you have been thinking about taking a two-wheeler loan to buy a bike, then you need to be aware of all the factors that can affect your EMI. A bike loan EMI calculator can help you calculate monthly EMI based on the principle amount and tenure. This will help you secure a better deal. So, without further ado, let us get started: 
Two-wheeler Financing in India
A two-wheeler loan is a financial instrument which allows you to borrow the money required to buy a two-wheeler from a lender. Most financial institutions offer around 80 to 85% of the current on-road price of the bike. The remaining amount needs to be paid by the borrower as the down payment directly to the dealer. It is best to use a bike loan EMI calculator to get an idea of the EMI amount that you have to pay per month.
Two-wheeler loans are extremely popular because they come with low rates of interest and easy repayment plans. This makes them a viable option for anyone who wants to own a bike. Here are the factors that affect the interest rate on your bike loan. 
1. Your Credit Score
Whenever you approach a lender for a loan in India, one of the first and most important aspects they take note of is your credit score. In simple terms, your credit score is a number that is assigned to you by credit rating agencies after taking various factors into account. The factors considered while calculating your credit score include:
  • The total number of loans you have taken in the past. 
  • The total amount of loan you have taken. 
  • Number of timely payments you have made in the past.
  • Missed payments, if any.
Credit rating agencies assign you a score on a scale of 900, and anything above 750 is deemed to be a good score. Your credit score helps the lender assess your creditworthiness, so that they can understand whether or not you are a responsible borrower. In order to secure a bike loan with a low rate of interest, make sure that you have a good credit score. This will let the lender know that you are good for the amount you owe. 
2. Loan Amount 
The second factor that affects the interest rate on your bike loan is the total amount of loan you have applied for. Most financial institutions offer up to 85% of the current on-road price of your bike as a loan. It means higher the cost of your bike, the bigger the amount of loan. This will also increase the rate of interest. You can easily use a bike loan EMI calculator to estimate your monthly repayments.
This is because when a financial institution is lending you a higher loan amount, the amount of risk is high as compared to a loan with a lower amount. Thus, the lender charges you a higher interest rate to cover their losses and justify their risk. 
3. Loan Tenure 
As a general rule of thumb, the longer the tenure of the loan, the higher will be the interest rate. The reason behind this is simple. When you take a longer time to pay back your loan amount, the chances of you defaulting on your loan increases significantly. Thus, increasing the risk associated with your loan. In order to justify the risk and cover their losses in case of a default, a lender will charge you a high rate of interest. Therefore, if you want a loan with a lower interest rate, choose the loan that has a shorter tenure. You can use a bike loan EMI calculator to figure out how much you need to pay per month once you bring home your two-wheeler.
4. Dealership Location
If you have been looking to buy a bike for some time, then you would have noticed that the price of the same model varies from one location to another. Depending on the location of the dealership and the taxes, the manufacturer's cost of delivering the bike also vary. In order to recover the extra charges incurred by the manufacturer, prices of the two-wheelers may vary at different locations. 
Since the price of the vehicle is vary, the loan amount you apply for will also be different, owing to either a higher or lower rate of interest charged to you. Thus, if you want a bike loan with a lower rate of interest, do your research and choose a dealership where the price of your bike is significantly low. 
5. Secured vs Unsecured Loan
Many first-time borrowers might be not aware of this, but there are basically two types of loans - secured loan and unsecured loan. In simple terms, a secured loan is one where you need to pledge an asset as a security. On the other hand, you do not need collateral to obtain an unsecured loan. 
Depending on the lender, you might have the option of choosing between either type of loan or just one. Along with this, depending on the type of loan you choose, the interest rate will vary. It has been generally observed that unsecured loans come with a higher rate of interest than secured loans, owing to the fact that the risk associated with the former is higher. 
Owning a bike will be a game-changer. A bike loan EMI calculator can help you plan your finances better by calculating the amount you have to pay on a monthly basis. This mode of transportation will not only save time but also money. Now that you know about the factors that impact the interest rate, go ahead and apply for the one which best suits your requirements. 
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