The impact of loan tenure on two-wheeler loan EMI

While qualifying for a two-wheeler loan is easy, it’s logical to weigh your priorities. It pays to understand the impact of loan tenure on your EMIs. After all, you would like to keep your EMIs manageable. This doesn’t imply that you should choose a loan tenure too long that would drain your resources in the form of interest. 

While calculating the two-wheeler loan repayment, it’s crucial to choose the right tenure. In case you choose the full loan tenure, you would be paying lower EMIs. However, a longer loan tenure comes with a higher rate of interest. Again, you may go for a shorter loan tenure to reduce the EMI amount. This, again, would reflect in higher EMIs. 

So, where do you strike a balance between affordability and finance management? Understanding your loan tenure impact on EMI will help you make a logical decision.

What makes loan tenure so important?

Most creditors providing two-wheeler loans consider the repayment capacity, age, and loan tenure to decide the rate of interest. Now, a longer loan tenure increases your risk profile. This prompts the lenders to increase their rates of interest.

 It’s crucial to choose the right loan tenure for your two-wheeler loan since your lifestyle and financial ease comes into the equation. Suppose, you get a loan of INR 2 lakhs to purchase your two-wheeler and decide to pay off the liability within 3 years. In this case, your two-wheeler loan repayment amount would be manageable each month. 

Suppose, you are undergoing stress and decide to pay the loan in five years. This implies that you would be paying a higher rate of interest and that too, for two more years. In the process, you would end up paying more interest to the bank or NBFC, while your EMIs would be lower.

If you are financially at ease, the best strategy should be choosing a shorter EMI tenure, like one or two years. This way, you won’t repent paying too much interest or a high interest rate to the lender. With financial comfort, you can repay your loan in a shorter time.

So, carefully consider your ongoing liabilities and lifestyle before choosing the loan tenure. Reputed banks and NBFCs provide flexible two-wheeler loan repayment that can be suitable for all types of borrowers.

What is the ideal tenure for a two-wheeler loan?

In general, reputed banks and NBFCs offer two-wheeler loans with a tenure ranging between one to five years.  To keep the EMIs affordable without stressing your finances, try to keep the loan tenure between one and three years. 

Depending on your financial stature, ongoing payments, and other financial liabilities, you should decide the loan tenure. In case you are financially stressed, don’t hesitate to go for a longer tenure. You might be paying more installments and interest to your lender with a longer tenure. However, this would involve a lower monthly financial outflow.

If you are financially well-off, why not close the loan within a year and boost your credibility? You would also be paying a lower interest rate, and of course, lower interest. 

Take Away

The loan tenure you choose for your two-wheeler loan ultimately decides your rate of interest and the amount you would be paying to your lender. This largely determines your EMI or the financial outflow every month throughout the tenure of the loan. After a careful evaluation of your financial stature and affordability, decide the loan tenure logically. 

Explore all the loan repayment options with reputed lenders and be strategic while selecting the tenure. This way, you can alleviate financial stress and repay your loan with comfort.