Are you planning to buy your dream bike? Can you manage your finances without putting any burden on your pocket? If not, you may want to apply for a two-wheeler loan to manage your finances well. The best part about a two-wheeler is that you do not necessarily need to pledge your assets as collateral. Depending on your lender, you can secure up to 100% of your preferred bike’s on-road price as a loan. Also, the 2-wheeler loan interest rates start from as low as 0.99%, enabling you to make timely repayments.
However, your interest rate is an integral part of your loan application. It directly impacts your EMI amount. Lenders allow you to secure a lower interest rate based on your age, income, credit score, etc. You can use their two-wheeler loan calculator to determine an interest rate that you can afford to include in your EMI.
Your interest rate is influenced by several factors, which are:
- Loan amount
The 2-wheeler loan interest rate depends on the loan amount you need. Although you can get the entire value of the bike as a loan, it does not mean that you should. It is worth noting that a higher loan amount fetches a higher interest rate. Make sure to pay a certain percentage of the bike’s value as a down payment to reduce the total loan amount you have to pay.
Your lender will charge you a higher interest rate to justify the risks involved when you opt for a higher loan amount. It is advisable to use a two-wheeler loan calculator to choose a loan amount based on your affordability.
- Repayment tenure
Another factor that influences the 2-wheeler loan interest rate is the loan tenure. Generally, you have from 12 to 48 months to pay your loan amount with interest. You have the luxury of choosing a longer loan tenure to repay your loan, but you will be paying more interest in the long run. When you opt for a longer repayment tenure, you are considered a risky borrower. Your lender may charge higher rates to justify the risks involved.
- CIBIL score
Your credit score is another crucial factor determining your 2-wheeler loan interest rate. Through your CIBIL score, your lender determines whether or not you should be trusted with a two-wheeler. It indicates if you are a creditworthy person.
Your credit score is a three-digit number that generally ranges between 300 and 900, which is calculated based on the underlying factors:
- Credit history
- Lengthy of credit history
- Credit utilization
- Credit mix
- New credit
If you wish to secure a lower interest rate, it is crucial to maintain a minimum CIBIL score of 750. Keep in mind that the closer you are to the 900 range, the greater are your chances of securing the lowest interest rate.
- Type of loan
Generally, a two-wheeler loan is divided into two categories – secured loans and unsecured loans. A secured loan is a type of loan that requires you to pledge your asset as collateral. Your asset’s value must be equivalent to or more than the sanctioned loan amount. On the other hand, an unsecured loan does not have requirements. You can secure a loan without giving anything as security.
The interest rate you get depends on the type of loan you choose. If you opt for a secured two-wheeler loan, your lender may offer you a lower interest rate, as they are assured of recovering the loan amount if you defaulted.
- Location of dealership
Usually, the price of the same model of the bike varies across different dealerships. For instance, the price of a Royal Enfield 500 cc is different in Delhi than the price in Mumbai. The factors that influence the prices include the location of the dealership, local taxes, and delivery costs.
The price of your preferred bike also has an impact on the total loan amount you can get. If your preferred is expensive, then logically your loan amount will also be higher. A higher loan amount always fetches a higher interest rate. So, if you wish to secure a lower 2-wheeler loan interest rate, it is better to find a dealership that offers a lower price for your bike.
In summary
If you want to buy your dream bike, getting a two-wheeler may be the best available option to own a bike without putting touching your saving or investment. Depending on our creditworthiness and repayment capacity, you can secure a lower interest rate and flexible tenure.
Furthermore, before applying for a loan, it is advisable to use a two-wheeler loan calculator to choose an interest rate based on your EMI affordability.
