A two-wheeler loan in India can be the right source to finance your favourite bike. However, before you avail a bike loan, you should keep in mind that not sticking to your EMIs schedule will have its consequences like affecting your credibility, lowering your credit score and increasing your outflow in the form of interest on interest, penalties and other charges. Worry not as you can avoid any such situation. So here are 5 tips that can help you pay off a bike loan faster:
- Understand the variables
A bike loan has four main parameters that affect the repayment of the two wheeler loan – the loan amount, interest rate, tenure and EMI. The EMI is a function of the loan amount, interest rate and tenure. The higher the loan amount or the interest rate, the higher is the EMI payment. The tenure is a double-edged sword as it affects EMI in two ways. The longer tenure lowers the EMI but makes you pay more in terms of the amount of absolute interest you pay. So, you should understand the variables and choose the three variables that are just right for you. It is better for you to take a loan amount that just meets your requirement – preferably less but definitely not more. You can check by using the EMI calculator.
- Use windfall gains judiciously
It is possible that you receive some windfall gains due to a variety of reasons. For instance, if you are in business, you could make some profits on account of executing a large order or earning an incentive. If you are salaried, you could be receiving a bonus. In any case, that gain is available to you to spend wisely. One way you can use this money is to either repay partially or fully the principal outstanding on your bike loan account. If you repay partially, you could retain the EMI amount reducing the tenure to enable you to repay your loan faster.
- Choose an appropriate EMI option
Choosing the appropriate EMI is the key to repay your loan faster. Tata Capital offers you a fixed EMI option and a structured EMI option. In the fixed EMI option, you get to choose the tenure and the EMI stays constant till the end of the tenure. In the structured EMI option, you can negotiate with Tata Capital to step up EMIs each year which will help you to repay the loan faster.
- Apply for the loan only when a credit score is high
Before you apply for a two-wheeler loan check your credit score and apply only if your credit score is greater than 750. This will help you to negotiate with Tata Capital to obtain the bike loan at the lowest interest rate possible. This will help you to pay a higher EMI so that you can repay the loan faster.
- Make prompt EMI payment
As a rule of thumb, ensure you make prompt EMI payments so that you keep your loan account squeaky clean. If you don’t follow this rule you are bound to default causing you hardships in terms of lowering your credit score and incurring additional expenditure in the form of penalties, charges and additional interest.
If you can follow the 5 tips given above you will be able to conveniently repay your two-wheeler loan faster. Once you analyze the contours of the bike loan, you can apply to Tata Capital here to avail a bike loan.
