EMI Calculator: Buying a ₹2 Lakh Bike on a ₹50,000 Salary? Here is How It Can Work

Rohit, a 28-year-old working professional, had been planning to buy his first motorbike. Like many buyers, his first instinct was to look at the showroom price and the EMI offered by the dealer. But before signing the loan papers, he decided to apply the 20-4-10 rule, a simple personal finance guideline that focuses on affordability rather than just ownership.

Starting with a 20% Down Payment 

Rohit shortlisted a motorbike with an on-road price of ₹2 lakh. According to the rule, he should make a 20% down payment, which came to ₹40,000.

By paying this amount upfront, Rohit reduced his loan requirement to ₹1.6 lakh. A lower loan amount meant lower interest costs over time and less dependence on borrowed money. It also gave him better loan terms from the lender.

Limit the Loan Tenure to 4 Years

The next step was loan tenure. The dealer offered a five-year loan with an attractive EMI, but Rohit chose to cap his loan at 4 years.

With a 4-year tenure, his monthly EMI worked out to around ₹3,982 at an interest rate of 9%. While a longer loan could have reduced the EMI slightly, it would have increased the total interest paid. A shorter tenure helped Rohit close his liability faster and save on interest.

Keep Costs Within 10% of Income

Rohit earns ₹50,000 per month. As per the 10% rule, all bike-related expenses should stay within ₹5,000 per month.

Apart from the EMI of ₹3,982, he estimated ₹700 for fuel, ₹300 for insurance, and ₹200 for regular maintenance. His total monthly bike cost came to ₹5,000, staying exactly within the recommended limit.

This ensured that the bike did not strain his monthly budget or affect his savings and other goals.

Why the Rule Works

By following the 20-4-10 rule, Rohit avoided overborrowing and ensured the bike remained affordable even after purchase. The rule helped him look beyond the showroom price and factor in long-term running costs.

Read more: What Led to ₹10 Lakh Fines on Meta, Amazon, and Flipkart?

Conclusion

The 20-4-10 rule acts as a practical checklist for anyone planning to buy a motorbike. By balancing the down payment, loan tenure and monthly expenses, it helps buyers enjoy their ride without putting pressure on their finances.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.