Total Interest Payable
Total Amount Payments
Are you thinking of buying a bike? Bikes are no longer just vehicles of convenience, but rather they have become the latest style statements. Today Indian roads can see many top bikes like Kawasaki Z H2 SE and Harley-Davidson stealing the show. Bikes can come in varied price range starting from 60,000 INR and climbing up to 79.70 lakh INR. Bikers have their own communities who cover long distances and impenetrable roads to establish new landmarks. Now buying a bike is also very easy. Almost all the financial institutions provide ready bank loans on differing interest rates that range from 7.35% p.a. to 20.9% p.a. They help in realizing the dream of owing a bike and make you a proud bike owner.
Two Wheeler Loan- An Introduction
A two wheeler or bike loan is the loan amount offered to you from a bank for the purpose of buying your preferred scooter or motorcycle. You have the option to pay back this loan value in equated monthly instalments (EMIs). The loans can be given out to businesspeople as well as salaried individuals. These loans are provided on simple terms and conditions. You can avail them by applying to the bank through bank website, mobile application, or physical application form.
Many companies also have the provision to arrange instant bank loans inside the two wheeler showrooms. So, anytime you want to buy a scooter or a motorcycle, then all you have to do is visit the local showroom and the company representative would assist you to complete the requisite formalities and instantly notify you about the eligibility status of the loan. If you are eligible then your loan application would be processed in the shortest interval and make you the proud owner of the latest two-wheeler.
The eligibility criteria for getting a two wheeler loan are quite simple and share many similarities among leading lending bodies.
- The applicant must be an Indian resident.
- He or she must be over 21 years of age.
- For individuals in the age group of 18 to 21 years, there must be an older co-applicant.
- The credit score should be decent.
- The buyer must be in employment for a minimum of six-month period or the owner of a business for minimum two continuous years.
- Different banks may have additional eligibility criteria.
The loan process requires certain documentations like
- A passport-size photograph
- A valid identity proof such as Voter ID, Driver’s License, Aadhaar Card, or Passport.
- Valid Address Proof like electricity bill or telephone bill.
- Loan application form
Fixed Interest Rate vs. Variable Interest Rate
Certain banks offer the option of fixed interest rate versus variable interest rate. Hence, knowing about them helps you make the right decision. You may select either a fixed or a variable rate depending on the associated risks.
In most cases, variable rates are cheaper than fixed interest rates. However, variable interest rates have a tendency to change as per market fluctuation while the fixed rates maintain a constant interest. For example, in case you have opted for a loan amount at a fixed rate of 11.5 % p.a., then this rate would remain constant irrespective of market fluctuations. Conversely, variable interest rates are dependent on economic upheavals and may increase of decrease according to the changes in monetary policies. These rates are associated with MCLR (Marginal Cost of funds-based Lending Rate) and alter each time the Reserve Bank of India declares a change in the repo rate. However, fixed rates are generally higher than variable rates and for this reason people usually opt for variable rates.
Online Processing of Two Wheeler Loan
While earlier two wheeler loans were only processed through a banking body, new changes in the banking system allows people to obtain a two wheeler loan even in the online mode. In fact, many banks have launched their individual mobile apps which borrowers can download from Google Play or Apple App Store, and fill in their requisite details. The loan processing time is very fast and sends instantaneous update on your loan application status along with the information whether you are eligible or not.
Two-wheeler Loan EMI Calculation
The EMI is the fixed amount that you have to pay against your two wheeler loan on a monthly basis. The EMI differs based on the loan principal amount, payback tenure, and the interest rate offered by the bank. Furthermore, the prepayment pattern and processing fee also affect the EMI. Hence, if you are planning on getting a two wheeler loan, then it is better to know about the expected EMI so that you will be comfortable paying the equated monthly instalment without suffering from an unexpected financial burden. You can compare the interest rate offered by different banks to calculate the EMI and select the one that will least affect your budget.
Two wheeler loan calculator is a useful repayment calculation tool which allows a person to calculate the EMI in just a few simple steps. All you have to do is type in the loan parameters and you will promptly receive your EMI and loan amortisation schedule.
The repayment process is through fixed monthly EMI for a predestined duration. The EMI consists of a combination of principal amount and payable interest rate. After the closure of this EMI payment tenure, you could apply for the hypothecation removal from your two wheeler and acquire complete ownership of the vehicle.
Down payment Requirement
Banks usually put a constraint where they ask for a small down payment on the vehicle before they grant the two wheeler loan. The down payment value is small and comprises of the difference between the vehicle’s on-road price and the loan sanctioned value. Once you pay the nominal down payment, the vehicle loan gets processed. The approved loan amount generally covers 90% of the vehicle’s cost. Although if you have the means then you can pay even a larger down payment value and take a smaller loan for the vehicle.
How to Lower Your Two Wheeler Interest Rate
While applying for a two wheeler loan, you must aim to acquire the loan with the smallest interest rate. Given below are a few steps which would allow you to get the lowest interest rate on your vehicle loan.
- Enhance your credit score: The credit score contributes significantly in determining the interest rate on any loan value. Hence, before applying for two wheeler loan try to rectify your credit score by paying outstanding credit card dues and other pending loans.
- Rectify the existing status of your debt: You can rectify your current debt status by checking the debt-to-income ratio. The debt status informs you the actual value that is going out in loan repayments from your existing salary. You can correct the existing debt status by paying off earlier loans and lowering the debt-to-income ratio.
- Negotiate with the bank: In certain instances, negotiation with the bank aids in better interest rates. The negotiation is particularly helpful in cases where you fall short of the eligibility criteria. It could be in a scenario where you lack the adequate earning for the vehicle loan but expecting a salary hike in the near future. Hence, when you present a proof of the expected salary raise, then the bank would be more willing to give you loan at a desired interest rate.
- Get loan from the current lender: If you have a savings account with a particular bank, then it would be beneficial to get a two wheeler loan from them. In case you are in good terms with the lending body, then that would work in your favour in getting you the preferred interest rates.
Factors for Consideration Other Than Interest Rates
Customer service: Many people fail to take into account the value of good customer service. You may get the loan at a low interest rate but if the customer service is weak then you would feel frustrated in times of need.
Disbursal time: Different lenders have different disbursal time. Hence, exploring this time frame would be helpful if you need to get the loan in a hurry to buy that dream vehicle.
Discounts and special offers: At different times of the year, the lending bodies come up with different types of discounts and special offers. Keeping an eye open for them would be beneficial for you and you could get the loan at special discount rates. These discounts are usually given during the festival seasons. So, if you can postpone buying that dream bike or scooter for some time then chances are that you will get a better deal for your patience.
Eligibility criteria: Not every lending body has the same set of criteria for ensuing a loan. Some have more stringent criteria than others. Therefore, look for a lender that has lower criteria for eligibility and ones which you can aptly fulfil. It would aid in hassle-free loans.
Hidden charges: Ensure to properly read through the loan offer document and find out about all types of hidden charges. This small investment of time would save you any unexpected future expenses. Moreover, you would also get a clear picture about the real loan value.
Prepayment charges: While prepayment helps you to get an early complete ownership of your vehicle, certain lenders put a constraint on prepayments and charge you a foreclosure levy. Hence, even if the interest rate is low, the prepayment levy would cost extra expense. So, before getting that two wheeler loan, check whether there is a fine on foreclosure, and whether given an option you would like to close your vehicle loan before the agreed tenure.
Processing fee: The bank charges you a one-time processing fee for loan application process. Different lending bodies have different processing fees and they could pose unexpected economic constraint. Hence, even if a particular bank is providing the bank loan at lower interest rate, you would find yourself a loser if the processing fee is high. So, be aware and opt for a bank that provides low interest rate and a reasonable processing fee.
Factors Affecting Interest Rates on Two Wheeler Loans
Age: Age impacts the ability to get loan and the rate of interest offered on it. For example, if you are nearing 60 years then the bank may get hesitant in passing the two wheeler loan or charge you higher for it. The reason is that you are close to your retirement and may lose the capacity for loan repayment.
Credit score: A good credit score would help you to get the loan at a lower interest rate and vice versa.
Employment nature: The interest rate would differ based on whether you are a self-employed on a salaried individual.
Income level: Giving out loan is a risk with every lender. Hence, if you have a higher income then you reduce that risk level by indicating that you will comfortably pay off the loan. This in turn results in a lower interest rate. However, if your income is less then you pose a greater risk to your lenders and they in turn charge you a higher interest rate.
Lender relationship: If you are already acquainted with the lender and have cultivated a good relationship with them, then chances are that you will get a better rate of interest on your loan.
Work location: Your work location also has an impact on the offered interest rate. If you work at a reputed company then that guarantees a stable income and a security that you are capable to pay off the loan amount. This works favourably in loan interest rate.