6 Best Two-Wheeler Loan Repayment Strategies to Pay Off Your Loan Faster

Planning to paying off your two-wheeler loan early? We have compiled a list of best two-wheeler loan repayment strategies that can help you clear your loan faster. Learn how to manage your motorcycle loan repayment and explore various loan repayment plans to ease your financial burden.

How to Pay Off Your Loan Faster?

1. Increase Your Loan EMI

One of the most straightforward two-wheeler loan repayment strategies is increasing your EMI (Equated Monthly Instalments). Higher EMIs translated to shorter loan tenure. This also helps in reducing the overall cost of the loan, meaning, overall, you pay less towards the interest compared to long-term loans.

Let's understand this with an example. Mr. X has taken a two-wheeler loan of ₹10 lakh at 12% p.a. for a tenue of 2 years. Mr. Y has taken a loan of the same amount at the same rate as Mr. X, just the tenure is of 3 years. Let's see the overall loan cost for both.

Disclaimer: The above table is for illustration purpose only. Ujjivan SFB doesn't take responsibility of the accuracy of the information.

You can see that though Mr. X is paying higher EMIs, the total cost of the loan is lower compared to Mr. Y.

Use an online Two-Wheeler Loan EMI Calculator to check the interest amount and EMI obligations.

2. Utilise Debt Management Plans

If you have multiple debts, consolidating them into a single debt management plan can simplify your repayment process and help you become debt-free faster. Here's how you can create a debt management plan for your loans:

1. Collect all your loan statements, including the loan amount, interest rate, and minimum monthly payment.

2. Add up the total amount of all your loans, including interest and fees.

3. Create a budget that includes all your income and expenses.

4. Identify areas where you can reduce expenses to free up more money for loan repayments.

5. Set up an auto-debit system to automate your monthly payments.

A debt management plan not only streamlines your repayment process but also ensures that you don't miss any payments. By making timely payments, you can avoid late fees and penalties, which will ultimately help you pay off your two-wheeler loan faster.

Managing multiple loan payments can be overwhelming. You can consolidate all debts into a single plan to simplify repayment. This reduces administrative hassle and helps you stay organised towards becoming debt-free faster.

3. Consider Part-time Jobs or Side Hustles

Another effective strategy to accelerate your two-wheeler loan repayment is by increasing your income through part-time jobs or side hustles. This approach allows you to earn extra money without risking your primary source of income. This could help you allocate additional income towards motorcycle loan repayment. 

Finding suitable part-time jobs or side hustles can be daunting.  However, you can explore online platforms or local opportunities that fit your skills and schedule. Diversifying income sources without jeopardising your primary job accelerates loan repayment and achieves financial goals effectively. Along with this, you may also consider following a strict budget.

4. Review Your Budget

When committed to quick two-wheeler loan repayment, review your budget and cut unnecessary expenses. Sticking to a strict budget can be challenging, especially with unexpected expenses. You can use budgeting tools to track expenses closely and identify unnecessary spending. Apart from this, you may also consider different types of loan repayment options available.

5. Take Advantage of Prepayment Options

Many banks offer partial or full prepayment options, enabling quicker motorcycle loan repayment and reduced interest. However, evaluate associated charges before prepaying. Most banks charge a prepayment fee of 1% to 2% of the outstanding principal. Uncertainty about charges and terms with prepayments is common. You can consult your bank to understand options fully, including fees for early repayment. 

6. Adopt the 50-30-20 Rule of Budgeting

Another effective two-wheeler loan repayment strategy is to follow the 50-30-20 rule of budgeting. Allocate 50% of income to essentials, 30% to discretionary spending, and 20% to savings and debt repayments. 

Balancing debt repayments with savings and discretionary spending requires careful planning. Using the 50-30-20 approach ensures steady progress towards paying off your loan faster.