Calculate EMI for a two-wheeler loan; the easy way

While applying for a two-wheeler loan, it’s natural to be inquisitive about the EMI you need to shell out each month. How do you think leading banks and NBFCs calculate this EMI? What parameters do they consider while determining your EMI amount?

Well, calculating your EMI for a two-wheeler loan involves factoring in several parameters. Although most lenders follow the same formula for calculating the EMI, interest rates can range from low to high. Let’s find out how your creditor is likely to calculate your EMI when you apply for a loan to purchase your motorcycle or scooter.

Using a two-wheeler loan calculator to determine your EMI

Most borrowers use the EMI calculator for two wheeler loan to determine the monthly amount they need to pay. An EMI calculator for your motorcycle loan is an application that can help you find the monthly EMI based on standard factors. So, you need to input the necessary information to find the monthly EMI.

Depending on the standard parameters and inputs, this tool helps in finding the exact amount you should be paying each month. This way, you can get a transparent view of the monthly expenses you would be making. With an informed decision, you won’t be unnecessarily paying a higher EMI. Comparing the interest rates and EMI amount, you can also choose the right lender.

Here's the standard formula to calculate your monthly EMI for motorcycle loan.

P x R x (1+R)^N]/[(1+R)^N-1

• P= Principal or the amount you take as a loan
• R= Monthly interest rate
• N= The number of instalments you pay

When you use your two-wheeler loan calculator, you need to input details like the principal or capital, interest rate, and the loan tenure in terms of months. Based on these parameters, the calculator will generate the EMI you need to pay.

Why should you use a motorcycle loan EMI calculator?

Here’s why you should use a motorcycle loan EMI calculator to determine the EMI you need to pay.

• The tool is fast and can help you compare the EMIs based on different interest rates instantly.
• You can make accurate calculations to get a transparent idea of the monthly EMI you need to pay.
• Since you can use the calculator on your mobile handset, you can find your EMI from any location or at any time.
• Your EMI loan calculator is accessible on multiple devices. Apart from phones, you can use them on laptops, smartphones, computers, and tablets.
• The EMI calculator determines the exact amount you need to pay each month. This aids in determining the loan tenure based on your repayment capacity. So, if you decide that you can pay a certain amount as EMI, you can determine the number of months needed to clear your two-wheeler loan.
• You can choose your lender strategically by comparing their interest rates, putting their value in the EMI calculator. Besides, you can negotiate better deals with your creditor once you know the best offers on the market.
• Some EMI calculators also come with features that can help you determine the cost-breakup of your EMIs. This includes the processing fee and other charges that you get to split while paying.
• Hand-written calculations sometimes carry errors. Even an apparently minor mistake can show a sizable difference in the EMI amount. With EMI calculators available, try to avoid manual calculations.

Reducing your EMI on a two-wheeler loan

When you use a bike loan EMI calculator, you can change the values of your inputs. Here’s how you can reduce the EMI on your two-wheeler loan by being strategic with your choice of lender.

• Go for a lower rate of interest. Reach out to a bank or NBFC ready to provide you with the loan at a lower interest rate. This can bring down the value of your monthly repayments.
• Pay a higher amount as your down payment. This ensures that the monthly EMIs would come down throughout the tenure of the loan.
• If you want to keep the monthly EMIs low, choose a longer loan tenure. This prolongs the repayment period, thereby reducing the EMIs you need to pay every month.

What role does your credit score play in calculating your EMIs?

Your credit score plays a major role in calculating your EMIs. Your creditworthiness largely depends on your credit report. Banks and NBFCs consider your credit score to determine your finance-handling habits. If your credit report shows red marks, it implies that you are not responsible while making your repayments. Or else, you might already be having too much loan to repay each month. 

If your credit report is not too good, you might fail to qualify for a low-interest EMI with the front-line banks. In these situations, you can reach out to one of the established NBFCs to qualify for low-cost loans. 

However, if your credit score is too bad and you happen to be a habitual defaulter, you might find it challenging to qualify for a two-wheeler loan. This explains why it’s crucial to make your repayments on time and maintain a healthy financial profile.

Take Away

Once you calculate your two-wheeler loan EMI and apply for the loan, it would be disbursed to your account if you are eligible for it. When you start making monthly repayments, try not to miss an EMI. This would invite a late payment fee or penalty. Depending on the lender or bank, the late payment fee varies between 3% and 5% of the unpaid EMI.

Most importantly, this would impact your credit score adversely. With a low credit score due to missed repayments, you will find it difficult to qualify for low-interest loans in future. In the worst case, lenders might refine to process further loans for you.

Being a responsible borrower, you can keep your credit profile in good shape. Being strategic with your choice of lender, you can save significantly on your EMIs.