What is a two-wheeler loan with low EMI?

Two-wheeler loans with low Equated Monthly Instalment (EMI) are a financing option aimed at budget-conscious buyers who have limited repayment capacity. Typically, this is how it works:

• Smaller Loan Amount: Instead of giving you the full loan amount you might be eligible for, the lending institution may approve a smaller amount. This helps keep your equated monthly instalments (EMIs) lower.
• Shorter Loan Amount but Same Tenure: Rather than increasing tenure, the loan amount itself is kept lower to ensure the EMI outgo declines. Also, the tenure length usually remains similar to that of regular two-wheeler loans. This prevents higher interest outgo over the long term.
• Flexible Eligibility: The requirements to qualify for two-wheeler loans with low EMI are often less stringent and easier to meet, making it accessible for more people. While interest rates also remain in the same range, eligibility criteria could be more flexible for customers.

Imagine you want to buy a bike that costs ₹80,000. Normally, you might be eligible for a loan of ₹70,000, which could lead to a monthly EMI of about ₹3,500 over 5 years at an interest rate of 10%.

With a two-wheeler loan with low EMI, the lending institution may approve only ₹50,000. This could reduce your EMI to around ₹2,500 for the same 5-year period. While you’re borrowing less, your monthly payments are more manageable, helping you fit the cost into your budget.