What is an Ideal Tenure for Your Two-wheeler Loan?

A two-wheeler loan is the best way to buy a dream bike at low-interest rates by paying monthly EMIs without affecting your budget. EMIs are designed in this way so that you can repay the loan at a dedicated tenure. However, if you are wondering what is an ideal tenure to repay your two-wheeler loan, then you are at the right place. Read on!

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Why is Two-wheeler Loan Tenure Important?

A financer or lender considers several factors to determine the interest rate on your two-wheeler loan, including-

  • Age of the borrower
  • Repayment capacity
  • Loan Tenure

If you choose a zero-down payment bike loan or 100% finance, you will be able to buy your dream bike without impacting your financial priorities. However, the interest component is comparatively higher as the 'risk' factor also increases. Therefore, it is highly advised to choose the shortest tenure to repay your two-wheeler loan if it is feasible for you. Let's understand this with the difference between short-term and long-term loans.

Difference between Short-term and Long-term Loans

Generally, Nonbank Financial Companies (NBFCs) and banks endorse short-term two-wheeler loans based on your expenditure. For one year, the risk exposure to the financer is low, therefore, as a borrower, you can easily get a loan without much documentation.

Whereas on the other hand, long-term two-wheeler loans are quite affordable, and it is easier to get approval even for higher amounts. However, the longer the tenure, the higher the will be the interest rate. So, you will end up paying higher interest.

What is the Best Loan Tenure?

If you have higher liquidity, it is better to choose a higher EMI and repay your loan as quickly as possible. If you have existing financial commitments which do not allow you to choose higher EMI, it is better to choose a long-term loan. Your loan repayment strategy should be according to your financial responsibilities.

How Choose the Best Two-wheeler Loan Tenure?

The loan repayment period directly depends upon your monthly disposable or surplus income. It also depends upon other factors like the spouse's income, stability income, assets, liabilities, etc.

Therefore, before applying for the two-wheeler loan, you must check which tenure will make your repayment easy. Also, you must consider all other related factors to decide on the best two-wheeler loan tenure. Here are 5 easy tips for selecting the loan tenure wisely-

  1. Shorter Tenure- If you choose a shorter period, the EMI's amount will increase. However, the number of transactions will be reduced, and ultimately, it will decrease the rate of loan interest.
  2. Longer Tenure- If your choice is for a longer period, then the EMI amount will be lessened. This automatically the increasing the number of repayment transactions. Also, this leads to a higher rate of interest.
  3. Choice of EMIs- The best and the most convenient ways to set your EMIs in monthly repayments. You can also use the two-wheeler loan EMI calculator online to check your monthly calculation in it.
  4. Recalculation of EMIs- You have an option to start with a longer tenure during the initial phase of repaying the loan. Then you can reduce it and recalculate your EMIs as per your repaying capacity.
  5. Repayment of EMIs- It is one of the crucial decisions that you should take regarding the settlement of the loan and its tenure for a two-wheeler loan. The ideal period to repay your two-wheeler loan is for two years. Moreover, it helps you to be free from financial obligations as early as possible.

However, in all of this, do not forget to buy a two-wheeler insurance policy with it. You can visit the official website of Policybazaar Insurance Brokers Private Limited and calculate your insurance premium for your bike model using an online bike insurance calculator for free. Also, you can compare multiple two-wheeler insurance plans as per the comprehensive bike insurance premiums offered by insurers and buy the one as per your budget.

Final Words

A two-wheeler is now a basic necessity of every Indian household. If you are planning to buy a bike or any other two-wheeler on a loan, you refer to the above article to understand an ideal tenure for your two-wheeler loan.

Keeping in mind your financial priorities and daily living expenses, choose an adequate period to repay your two-wheeler loan. Also, do not miss obtaining the right two-wheeler insurance policy to protect your precious possession from several unforeseen risks.

Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.

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^The renewal of insurance policy is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. Actual time for a transaction may vary subject to additional data requirements and operational processes.

^The buying of Insurance policy is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. Actual time for transaction may vary subject to additional data requirements and operational processes.

#Savings are based on the comparison between highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB.

*TP price for less than 75 CC two-wheelers. All savings are provided by insurers as per IRDAI-approved insurance plan. Standard T&C apply.

*Rs 538/- per annum is the price for third party motor insurance for two wheelers of not more than 75cc (non-commercial and non-electric)

#Savings are based on the comparison between the highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB.

*₹ 1.5 is the Comprehensive premium for a 2015 TVS XL Super 70cc, MH02(Mumbai) RTO with an IDV of ₹5,895 and NCB at 50%.

*Rs 457/- per annum (1.3/day) is the price for the third-party motor insurance for private electric two-wheelers of not more than 3KW (non-commercial). Premium is payable on an annual basis