Two wheelers are a preferred mode of transportation in India as the majority of people fall in the middle-class income group. They are cost-effective, fuel-efficient, and operationally cheap than other automobiles. Many prefer to buy two-wheelers through loans in order to reap the benefits offered by financial institutions. However, a loan can stretch the monthly budget, as you have to pay the EMIs on time. This increases the burden on your finance. Hence, people want to be debt-free as soon as possible. If you are among those looking to pay off the
two-wheeler loan faster, then these six important tips can help you do that easily.
1. Bi-weekly payments models You can choose a bi-weekly mode of payment. The borrower and lender can come to a bi-weekly EMI payment agreement. This way, instead of a monthly
EMI payment, the borrower can pay the amount twice in month. This will help you repay the two-wheeler loan faster. Also, accelerated repayment of the loan will help the borrower combat the impact of compounding interest over the tenor.
- Select a short tenor
The tenor, interest rate and the amount of loan are the key parameters to decide the monthly installment of the loan repayment schedule. The tenor of the loan essentially determines the monthly amount that needs to be paid by the borrower. A shorter tenor generally ends up with a higher monthly installment, thereby, quickly repaying your loan advances. Clearing the liability sooner frees you from psychological stress and substantial financial burden.
Also Read: 5 Tips to Pay Your Bike Loan Easily - The 50/30/20 rule of budgeting
According to this rule, an individual should spend 50 % on needs, 30% on wants and 20% on savings. This approach distributes your finances towards different goals in a practical way. When you are saving; you must create an emergency fund, which can be used to pay off the outstanding amount. This way you can make extra payments and get rid of the debt faster
- Prepay the principal loan value
The borrower can prepay the loan with surplus funds in any given month. Although, certain
financial institutions may charge you a certain amount as a pre-payment fee. However, there are lenders, who are willing to accept one of two extra installments. Borrowers should take advantage of that option to reduce the burden of the debt.
- Know your loan agreement
Often borrowers, who do not read the terms of loan agreement properly, end up paying many upfront charges. So, it is important to go through the paperwork thoroughly and negotiate the amount, interest rate, and tenure with the dealer. Negotiation usually benefits the borrower as dealers do not want to lose a potential buyer. With the renegotiated terms, you will be able to repay the loan sooner.
Also Read: Take a Two-wheeler Loan and Simplify Life - Choose the auto pay mode
Opting for the service of auto payments will save you a lot of time and paperwork. A specific amount is deducted on a predetermined date every month. Some financial institutions even offer discounts if you choose this service from them. If you do this, you no longer have to make a conscious effort to save money for the monthly payment of the EMI.
Also Read: The Basics of Bike Finance Conclusion With these important tips, you can pay off your two-wheeler loan faster. Doing that will also have a positive impact on your credit score.
In addition, if the score is high, it will make it easier for you to obtain a loan in the future. For a lender, a
credit score is a huge factor as it helps them in determining the creditworthiness of the borrower. The full repayment of the loan will make you stress-free, and give the financial freedom to make other purchases.
