Taking a loan is a big financial decision that should not be done without enough thought and a through analysis of your ability to repay the loan. Once you are confident that you can fulfil the financial responsibility that a loan devolves upon you, it is time to wade deeper into the waters and get a complete understanding of the loan itself. If you have been thinking of taking a two wheeler loan in Ahmedabad, this post will help you understand all the jargon associated with it and make it all simple for you to understand.
Terms associated with two- wheeler loans
This term refers to the total amount you want to take as your two- wheeler loan in Ahmedabad. If you are making a down payment on the vehicle, then this amount will be the price of the bike minus your down payment. If you have savings that are earning a very low interest, then consider pulling them out to pay a large down payment for your new bike especially if the interest outgo on your loan will be substantially higher than the interest the savings is earning right now.
The interest charged by the lender for you to make use of his money is the interest rate. If you are opting for an online bike loan, you will find this on the website of the lender. Use this rate to compare terms with other lenders.
The duration over which you have to pay back the loan or the duration at the end of which you must have repaid the loan in full is called the loan tenure. A longer tenure loan will require more interest paid out overall. A shorter tenure has higher EMIs but the overall interest payment is lower.
This is the most important aspect for the lender because it tells him whether or not you are a good risk to take on by sanctioning the loan. To determine your repayment capacity or ability to repay, your income, your spending habits, your savings as per bank statements, other loans that are open- all these are assessed. For you too, assessing repayment capacity is important because it tells you whether you can afford the loan or not.
EMI or Equated Monthly Instalment –
The EMI is the monthly repayment of principal loan amount plus interest you make to the lender to pay back your loan. The EMI consists of both principal amount and interest each month. It helps to know how much principal you are paying off each month because then you know how much of the loan amount is still in balance. You can make use of online bike loan EMI calculators to figure out your monthly EMIs. An online bike loan EMI calculator is simple and easy. All you have to do is enter the loan amount, interest rate and tenure to get the monthly EMI you need to pay.
Understanding these terms helps you understand the loan more clearly and comprehend your responsibilities towards paying it back. It also helps you stay wary of unscrupulous lenders who may mislead you about what each means. Check all these aspects when you compare two- wheeler loan in Ahmedabad offered by various lenders before finalizing one. Ask the lender questions if you have doubts about how any of the loan terms apply to you and what is the exact impact on your finances. After all, this is a fairly long term liability that you are taking up; it pays to be fully prepared beforehand for all contingencies.