A Complete Guide To Choosing The Two-Wheeler Loan Tenure

With more and more people preferring personal mobility over public transportation due to the corona virus pandemic, two-wheelers are quickly becoming a necessary requirement for every household. If you too are thinking about buying a vehicle, then you should consider taking a two-wheeler loan. With number of financial institutions offering attractive terms, availing a two-wheeler loan is a simple task these days. Once you have decided on a loan option and narrowed down on a lender, the next step is choosing the right the loan tenure.
 
Choosing the perfect tenure for your bike loan can look easy on the surface, but if you want to save money, you need to make smart decisions. In order to save money on your loan, there are two important aspects you need to consider. The first is the principal amount (which is the total amount of loan you are availing), and second is the tenure of your loan (the number of years you will take to repay the loan). As a rule of thumb, the longer your tenure, the higher will be the interest.
 
          Also Read: A Ready Guide to Two-Wheeler Loans
 
When deciding on a loan tenure, you must keep the below-mentioned aspects in mind -
 
Rate of interest

The first and most important aspect to consider is the interest rate applicable on your loan. In India, bike loans typically have an interest rate of 10% to 30%, depending on the financial institution as well as the principal amount of your loan. Along with this, bike loans come with a fixed rate of interest, which means that your EMI amount will remain the same all throughout the tenure. When you choose a loan with a shorter tenure, the amount of interest you pay will be significantly less as compared to the amount you have to pay when you choose a longer tenure.
 
          Also Read:A Beginner's Guide for Buying a Bike
 
Principal amount & down payment

The second thing you need to consider is the amount of down payment you are willing to pay, and the total principal amount you will owe to the lender. In India, the two-wheeler loans will only finance between 90 to 95% of the on-road price of your vehicle, and the rest of the amount will be calculated as a down payment. For example, in a two-wheeler worth ₹1, 00,000, you can pay ₹20,000 as down payment and take a loan for the rest. If you pay a higher amount as down payment, your principal amount will be less, and so, you will be able to pay it back within a shorter tenure.

What is the best tenure for your two-wheeler loan?

The two-wheeler loans generally have a tenure between one to five years. To pick the best one, you need to take into account various factors, most importantly, your financial condition. If you are under financial pressure, a loan with the longer tenure will be best for you. But at the same time, longer tenure means higher interest rate. On the other hand, if you are financially well off, and will be able to pay a higher EMI every month, then go for a one-year loan.
 
          Also Read:Two Wheeler Loans and Their Various Facets
 
To conclude

The tenure you choose for your two-wheeler loan will ultimately come down to the interest amount you are willing to pay, and subsequently, the amount of EMI you can afford every month. Therefore, the best way to move forward will be to carefully consider your financial situation and then proceed with the decision.