Loans act as a gateway to fund financial emergencies or achieve goals such as owning a home, buying a vehicle, etc. Apart from the loan’s interest rate, tenure, and amount, another crucial parameter is the flexibility and availability of different repayment options.
When it comes to bike loans, gold loans, home loans, etc., there are different payment plans offered by many lenders. Given that two-wheelers are one of the most common transportation modes in India , knowing the bike loan repayment options is important.
But before jumping onto repayment plans and loan payment facility, let us have a quick look at a guide to availing of a bike loan:
1. Do not ignore or forget to factor in the bike’s insurance and registration costs during the calculation of the overall cost of purchase.
2. Take into consideration your existing financial obligations, such as loan EMIs, credit card bills, rent, etc. While selecting the tenure of the new loan, your EMI would depend on the tenure chosen.
3. Thoroughly compare amongst various prospective lenders before zeroing in on any, and base your decision on factors like interest rate, processing fee, tenure, amount, prepayment charges, and repayment options.
Key Features of a Bike Loan
- Margin amount – The margin is the fraction of the bike’s cost that the borrower has to pay from their pocket. Most banks and NBFCs may not offer 100% finance of the vehicle. Usually 5%-10%, has to be borne by the borrower. The margin offered varies from lender to lender and is calculated post the lender’s risk assessment and judgment of borrower’s credit profile and repayment capacity.
- Loan repayment tenure – The lender usually provides a tenure of 12 months to 5 years for bike loans. The borrower can choose any tenure amidst this range that suits his financial requirements, credit profile, and repayment capacity.
- Loan eligibility criteria – Lenders have their respective pre-determined eligibility criteria while evaluating a borrower’s loan application. These include income, age limit, job profile, etc. Failure to meet these criteria can lead to the rejection of the loan application. Before submitting a loan application, it’s prudent to use an online eligibility calculator provided by some lenders and go-ahead to submit only if you believe you are eligible and possess the repayment capacity.
Although many lenders offer two-wheeler loans, we, at Shriram Finance, strive to provide the best and smooth bike loan experience. Have a look at our bike loan product and its unique features here:
Bike Loan Repayment Options
Lenders mostly provide the equated monthly installment (EMI) option to repay the bike loan. EMIs include both the principal as well as the interest component of the loan. However, to make it easier, convenient, and hassle-free, some lenders tend to offer two EMI repayment plans for borrowers as per their income and cash flow.
- Fixed EMI option - Under this EMI repayment option, the EMI remains the same throughout the tenure, including both the principal and interest components of the loan. This is the most common EMI option for almost all loans and not only for bike loan repayment, and is ideal for borrowers having a stable income.
- Structured EMI - Some lenders provide this option wherein the borrower can customize their EMIs as per their financial requirement and repayment capacity. Mostly, in this case, it’s a step-up EMI repayment plan, wherein the EMI gradually rises over the loan tenure’s period. This option is suitable for those who expect their income to witness upticks at regular intervals during the loan.
How to Choose the Right Bike Loan EMI?
While wondering how to repay a loan, deciding upon the suitable EMI is vital to avoid defaulting or relaying loan EMIs and have a smooth repayment experience. Here are 3 key factors to keep in mind while choosing the EMI of your bike loan:
- How soon can you finish repayment of the loan (tenure) - If you wish to finish the loan repayment as soon as possible, choose a shorter tenure. However, keep in mind that a short tenure implies higher EMI outgo every month, which might put pressure on your finances.
- How much EMI is affordable - While deciding tenure, pay importance to your EMI outgo. If you are comfortable with small EMI, choose longer tenure. And to reduce your overall interest outgo due to long tenure, try to prepay the loan when you have surplus funds during tenure.
- Interest rates applicable on loan - As interest rates widely vary from lender to lender and as per customer’s credit profile, it’s important to opt for the lender with the lowest interest rate. But factor in other parameters like processing fee, amount, tenure, etc. Finalize the lender whose deal fits best as per your financial requirement and repayment capacity.
At Shriram Finance, we strive to provide the best services to our existing and prospective customers during the loan process. To choose the suitable EMI for your wheeler loan, you can use our online EMI calculator. At every step of the loan process, we are dedicated to being transparent and finding all possible ways to assist you.
Different Payment Plans for Other Loans
Besides bike loans, there are loan payment plans for gold loans, home loans, etc., which are offered by some lenders. Let us have a quick look at these repayment options:
1. Monthly servicing of interest only
It involves repaying the interest amount every month as per the loan’s EMI schedule. The principal amount is repaid only on maturity of the loan, implying that the borrower is liable to pay just the interest component of the loan during its tenure. This type of repayment option is suitable for those who lack adequate regular cash flow or income to service both the interest and principal component of the loan during tenure.
2. Upfront interest payment
This option involves payment of the interest component upfront at the time of loan sanctioning, and the principal component is repaid at the end of the loan tenure. This repayment option can suit those borrowers who can make the upfront interest payment but wish to opt for a non-EMI route to pay principal at the end of tenure.
Summing it up, it’s crucial for borrowers availing not only bike loans but also gold loan, home loan, and business loan to carefully choose the most suitable repayment plan. Feel free to contact Shriram Finance for any queries. We will be eager to assist you in every possible way before and after availing loan or any other service.