Funding a bike purchase with a bike loan is the simplest way of buying your dream bike without putting undue strain on the budget. You can repay its cost in easy EMIs without exhausting your emergency savings. These days, getting a bike loan is extremely easy. However, planning the loan repayment with the bike loan interest rate is essential. That is when a bike loan EMI calculator plays a significant role. It is a free online tool that helps compute the monthly installments for various loan terms.
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Continue reading to know how to use a bike loan calculator and why it is important before availing of a bike loan.
What is a Bike Loan EMI Calculator?
A bike loan gives the advantage of using the loan amount to purchase a two-wheeler and repay its cost in monthly instalments called EMIs (Equated Monthly Instalments). Reputable lending institutions are flexible with loan terms, allowing repayment over a fixed time called tenure. Each EMI consists of the bike loan’s principal amount and the interest payable. Therefore, your bike loan EMIs depend on three crucial factors:
- Principal amount
- Interest rate
- Repayment term
A bike loan EMI calculator computes loan EMIs using these three variables. Although manual EMI calculation is also possible, it is time-consuming, error-prone, and complicated. Calculating the EMIs using an online calculator is an easier and faster way to calculate EMIs with accurate results each time.
How Does an EMI Calculator Work?
An EMI calculator works based on the following mathematical formula:
EMI = [P x R x (1+R)N]/[(1+R)N-1]
Here, P is the principal amount you borrow, R is the interest rate applicable, and N is the number of months in the selected loan tenure.
Calculating the EMIs manually is a challenging mathematical calculation, especially if multiple calculations are necessary with different variables until you reach the most suitable repayment scheme. That is why using a bike loan calculator is helpful. It calculates the EMIs based on the variables you enter and displays the result within seconds. It makes the process easier and faster, allowing you to plan the loan repayment better.
Stepwise Process to Use a Bike Loan EMI Calculator
A bike loan EMI calculator is a user-friendly tool that assists in calculating bike loan EMIs. Knowing the exact EMI amount to pay for the loan helps you plan your finances smartly and ensure timely repayment. It ensures a smooth borrowing and repayment process without financial struggles. You can apply for the right loan amount and choose the appropriate loan tenure according to your bike loan interest rate and repayment capacity. Follow these steps to use a loan EMI calculator:
- Open the online EMI calculator on a web browser or loan app.
- Enter the loan amount you wish to borrow.
- Enter the interest rate in the relevant field.
- In the next field, enter the loan tenure in the number of months.
- Next, click the ‘Calculate’ button to know your monthly EMIs.
You will see the EMI amount instantly. Try different combinations by changing variables until you find a suitable loan plan. Finalise the loan amount and repayment tenure and plan your application accordingly.
Example: Let’s take an example to see how the bike loan EMI calculator works. Assuming that you borrow a bike loan of ₹ 1 Lakh at an interest rate of 12%, you must pay ₹ 9,333 per month for a loan tenure of 12 months, but the EMI amount will be ₹ 5,167 for 24 months. Similarly, if you reduce the loan amount to ₹ 90,000, you will pay ₹ 8,400 for 12 months and ₹ 4,650 for 24 months, respectively. So, based on the results, you can modify the loan amount or repayment tenure to get a repayment scheme that best suits your affordability.
Who Should Use an EMI Calculator?
Anyone planning to purchase a two-wheeler on loan should use a bike loan calculator. It will help them know their monthly EMI amount, allowing them to plan their repayments better and reduce the chances of default. An EMI calculator computes the EMI amount based on the loan amount, interest rate, and repayment tenure. Using this tool helps you arrive at an instalment amount you can comfortably repay without stressing your budget. It also allows changing the loan term or principal amount to make the repayment more manageable. Here are a few tips for choosing the right variables:
Try to make the maximum possible down payment to reduce the principal amount to borrow. Although many lenders fund up to 95% of the bike purchase, it’s crucial to minimise the borrowed amount to reduce the debt burden and keep repayment easy.
Each EMI consists of the principal and the interest amount. Before applying for a loan, do market research and opt for a loan plan with the lowest bike loan interest rate.
Opting for a longer tenure distributes the EMIs over a longer period, thus reducing the monthly financial burden. However, a longer loan term also attracts more interest costs. Therefore, it is better to repay the loan as quickly as possible.
Reasons to Use a Bike Loan EMI Calculator
Using an EMI calculator is beneficial due to many reasons. Let’s take a look.
- Easily available online and convenient to use
- Compare and calculate the monthly payment amount, and choose a term according to your repayment capacity.
- Better financial planning to manage the EMIs properly
- Quick calculations without any chance of errors
- No complex manual calculations required
- Accurate results within a flash second
- Complete repayment details, including the interest cost, total loan cost, etc.
Ensuring timely repayment is essential before purchasing a high-value product like a two-wheeler. While planning to apply for a two-wheeler loan, it makes you aware of the intricacies and the costs involved. Therefore, use a bike loan calculator to calculate your prospective monthly obligations and opt for a loan plan with budget-friendly EMIs.