India’s two-wheeler market is growing rapidly, so much so that currently, India is the largest two-wheeler market in the world. There are several reasons behind this growth, starting from affordability, easy maintenance, and others. However, besides all the socio-economic issues, one reason playing a key role here is the easy availability of credit options to purchase a motorcycle.
The dedicated bike loans offered by financial institutions across India are making this process straightforward. With the help of two-wheeler financing, you can easily buy the two-wheeler you have wanted for so long. And it will also not create a burden on your current financial status.
A loan is a great choice, but it should be handled carefully, or it can adversely impact your financial profile. Therefore, before taking a two-wheeler loan, it is crucial to determine a few points, specifically the tenure of repayment. You can choose either a short-term or a long-term tenure for your two-wheeler loan.
Why is it important to know the tenure?
One of the significant factors behind a loan is its interest rate. The lender fixes the rate depending on some additional aspects –
- Age of the borrower
- Repayment capacity
- Tenure of loan
If you choose a short-term loan, the overall interest rate is expected to be less than a long-term loan. Hence, it is crucial to understand which type of tenure you should opt for to get the full advantage of the loan. Here is a brief comparative analysis between the two types of loan tenures, and understanding them will guide you in making the right decision.
Short-term loan
Some advantages and disadvantages come with a short-term tenure for your loan.
Advantages of short-term tenure
- Low rate of interest: Usually, lenders charge a low-interest rate when you go for a short tenure. Since the tenure is short, the lender’s risk quotient is minimal. So they can extend a comparatively low-interest rate.
- The total burden will be less: Since the interest rate will be lower, your total financial responsibility will be less. So, you will get a chance to save money on repayment.
- The burden will be off quickly: A short-term loan ensures you get debt-free quickly. As soon as you complete the repayment, the vehicles will be yours on paper.
Disadvantages of short-term tenure
- The high amount of EMIs: A short tenure implies that the EMIs of your bike loan will increase. You will have to pay a large chunk of your monthly income for the repayment. This can create some issues if you want to take another loan at the same time.
- Stretches your finances: As the EMIs are high and a large chunk of your monthly income goes towards them, it will stress your finances for the period. Hence, managing unexpected expenses can be an issue.
Long Term Tenure
Likewise, when you opt for a long-term tenure for your two-wheeler loan, you will get some advantages as well as some disadvantages.
Advantages of long-term tenure
- EMIs are low: A longer repayment tenure for your motorcycle loan means you will be paying small EMIs. So, it reduces the worry of managing the repayment.
- Can take up other commitments: Since a longer tenure lowers the EMIs, it leaves enough disposable income for you to take up other financial obligations when required. As a result, it becomes easier for you to manage any unexpected financial need.
Disadvantages of long-term tenure
- High-interest rate: Long-term tenure implicates a higher risk for the lender. Consequently, the lender charges a high rate of interest for it. Even though you are getting enough time to repay the loan, you also have a high-interest rate to take care of.
- Increases the total repayment amount: As the interest rate increases and the tenure of the two-wheeler loan increases the total repayment amount. Hence, your financial burden will be high.
- Carry the burden for a long time: When you opt for a long tenure for your loan repayment, you are bound to carry the financial responsibility for a subsequent amount of time. You have to continue paying the loan for the chosen tenure. You can go for part payment or opt for pre-payment as well. But some lenders may charge additional fees for this. So, you have to consider that angle also.
This is an overview of the shorter and longer repayment tenure and its advantages and disadvantages. Now, as a prospective borrower, you need to factor in all the pointers and then decide. And in this process, you can take the assistance of a bike loan calculator.
What is a bike loan calculator?
It is an online financial tool that helps you to find out the EMIs of your loan. Based on the EMI, you can decide if the tenure is suitable for you. You can change the repayment period, see which one provides the best EMI for you, and then decide.
Benefits of a motorcycle loan calculator:
- You can use the calculator completely free of cost on websites of reputed lending institutions.
- The procedure to use it is also simple.
- You don’t need to provide any personal information to access this financial tool.
- It offers accurate and instant results.
Conclusion
The suitable loan tenure will be the one that goes best with your financial suitability. Hopefully, you now have clarity on the impact of tenure on the loan repayment and your overall financial health. You can use the bike loan calculator to find a suitable loan tenure and have a pleasant borrowing experience.