The 21st century life is a fast paced one. From our schools and colleges, to our offices and workshops, every second counts. Hence to save up on that precious time, many opt for personal modes of transportation. Of these, the two wheeler called motorised bicycle or bike has been an extremely popular choice amongst the masses.
There are several tangible reasons behind this popularity enjoyed by the bike. These machines cost very little compared to the utility they deliver.
They can easily maneuver narrow alleyways and crowded streets because of their compact designs, but they are also hardy enough to endure long trips on highways.
And because of several efficient and easily available EMI plans specifically designed for two wheelers, it has become affordable and almost a necessity to own a bike, so that one may keep up with the ever quickening pace of life.
However it is very important to be aware of the details of any loan scheme one enters before finalising any deals. The online Bike Loan EMI calculating tool, available on the Money View website, can help you accurately estimate your monthly EMI charge, once provided with the relevant data like principal loaned amount and tenure.
Financial norms in India regarding two-wheeler loans:
To legally acquire a two wheeler loan from any institution or bank recognised by the financial system, one must be at least 21 years of age.
Usually most banks offer 80 % to 85 % of the total cost of the bike. The remaining amount has to be paid by the borrower before the acquisition, as down payment. The amount borrowed from the bank has to be paid back according to the scheme agreed upon in the deal.
Factors influencing bike loan schemes and rate of interest:
The bike loan schemes and the subsequent rate of interest charged on the loan depends on the following factors.
- Credit score of the borrower:
The credit score is a gradation given by any financial institution, regarding the financial dependability of any customer.
All through your transaction history with the bank:
- If you have taken any loan,
- The number of loans taken by you,
- The number of payments you have made within deadlines,
- If you have missed any deadlines for payments, and
- The number of deadlines missed by you.
These are all factors considered by banks while assigning you the credit score.
If you have a clean history with regular payments made within deadlines, then the score will be better. It will help you get better rates on the interest applicable to the two wheeler loan you are applying for.
The credit score is measured on a scale of 900. If your score is upwards of 600, your chances of acquiring a loan should be fine. Although scores of 750 or more really helps. This score is a benchmark which tells the bank of your trustworthiness and reliability, and thus ensures you better discounts on the interest rates of your loans.
- Amount that is being borrowed:
Most of the banks usually offer 85% of the gross amount payable as the price of the bike, as a two wheeler loan. Which means as the price of the bike becomes higher, the amount to be loaned also increases.
If the amount exceeds a certain threshold, banks may consider the loaning process to have additional risks. In order to compensate for those risks they may apply additional charges on the interest rates for the EMI.
The online Bike Loan EMI calculator on the site Money View can help you easily calculate these increases and decreases in EMI according to the loan amount.
- The time period designated for repayment of the debt:
If a person takes out a loan and plans to pay it back gradually over a very long stretch of time, it increases the chances of that person missing payments and even going absconding.
Hence, to rationalise and compensate for that incurred risk, banks and other financial institutions make it a point to charge added interest on loan schemes which grant considerably extended tenure periods.
If one needs to pull every stop to minimise the interest rate on the EMI, they must be careful to choose schemes that provide tenures of short duration. Online EMI calculators can also be utilised to estimate the impact of the tenure on interest rates and optimise your plan according to personal conveniences.
If you plan to pay the debt back little by little over many years, in totality it might end up costing you much more in the long run, compared to what it would cost in total to pay it back within months.
- Place from where the bike is purchased:
There are many factors affecting the price of a bike. A bike of the same brand and make can have wildly varying pricing at different places, just depending on the location of the dealership.
The location of the dealership determines many things like cost of delivery, taxes applied and so on. To account for these additional factors prices may get bumped up from place to place.
In order to get the best pricing and by extending loan interest rates, you must carefully pick out the dealership where the best price is available.
Usually this would be a showroom or dealership in close proximity to the customer’s primary address.
- The nature of the loan being applied for:
Fundamentally, loans can be categorised into two broad groups. There are secured loans and there are unsecured loans.
These types are determined by the means of insurance the bank adopts to make sure it gets back the money it lends out.
In case of unsecured loans you need not submit anything as collateral.
However, secured loans are only given by banks after the borrower grants the bank permission to take possession of one or more of their assets and properties, in case of failure in repayment of the debt.
Since the unsecured loans are not insured as such, banks considered them to pose higher risks as opposed to secured loans. Hence, higher interest rates are imposed on unsecured loans to compensate for said risks.
If the bank offers you both choices, you must carefully evaluate the pros and cons of both kinds of loans, and their personal situation, before committing to a scheme.
It is understandable that taking a loan can seem like a daunting task with risky implications.
However, given the immense scope and utilities provided by two wheeled vehicles, it becomes almost imperative to purchase one. Today there are countless schemes offered by a varied array of banks, which include something applicable and available for almost everyone.
Even so, while taking any kind of loan it is important to be mindful of the financial impact and long term implications of the debt to be incurred. This is precisely the reason to use the EMI calculation feature present in personal finance sites like Money View and plan ahead, estimating the approximate amount to be paid each month.
So one may use the data provided here to apply for the loan scheme appropriate to the bike one plans to purchase and their financial condition.
After all, once you get that dream bike it will open up a whole new world of possibilities, that would be worth every bit of the effort, cost and headaches it would take to purchase it.