The easiest way to acquire a bike or a scooter without straining your budget or using up all your cash is through Two-Wheeler Loans. Moreover, the competitive interest rate, easy repayment, and other associated benefits make it an ideal financial product for the job.
Now, a point to remember here is that the interest rate levied on a Two-wheeler loan is one of the crucial factors here. Since it determines the total debt, it is crucial to know the factors that affect it and how to counter it.
Factors Affecting the Two-wheeler Loan Interest Rate
Here are some factors that affect the interest rate on a Two-Wheeler Loan –
Your Monthly Income
Your monthly income affects the interest rate of your motorcycle loan. Since a high income means you are less likely not to pay back a Two-Wheeler Loan, it could help you get the lowest interest rate. Before giving you a Two-Wheeler Loan, most lenders check your income to see if you can afford it.
So, if you are employed with a reputed company or as a self-employed individual who has a steady business, you can then negotiate a lower interest rate with your lender.
Your Credit Score
One of the major factors affecting the interest rate on a new or a used bike loan is your credit score. This three-digit number signifies your creditworthiness as a borrower. It takes into account your past debts and your repayment record and then assigns this score, which ranges from 300 to 900. Typically, a score of more than 750 is considered ideal..
With a high credit score, you can get a low-interest rate. Otherwise, you can wait and improve your credit score and then apply.
Your Loan Amounts
The principal loan amount you apply for is another factor that determines the final interest rate. So, if you apply for a higher loan amount, where the lending risk is high for the financial institutions, they will charge a higher interest rate to safeguard their interests. On the other hand, if you apply for a comparatively small loan amount, you will be able to secure a lower interest rate.
A down payment is a money that is paid upfront to secure the purchase of a Two-Wheeler. The connection between the down payment and interest rate is inversely proportional. If you make a higher down payment, you will have to bear a lower interest rate and vice versa.
The reason is that a higher down payment will lower the total debt amount, reducing the lending risk for the financial institution, and they may negotiate a lower rate.
Your Loan Tenure
The loan tenure and the interest rate is inversely proportional. If the loan is longer, the interest rate will also go up. It’s because lenders think that giving you a long time to pay back the loan will increase the lending risk. On the other hand, with a shorter loan term, this risk is minimal. Hence, the lender will be open to negotiating the interest rate with you.
So, consider a shorter term if you want lower interest rates. But it’s essential to be careful when choosing your term because shorter terms lead to higher EMIs, which could put you in a position where you can’t pay back your loan.
In this regard, using a Two-Wheeler EMI calculator, you can figure out how much you have to pay each month. This will help you find the most affordable installment in the shortest time. This will help you keep the loan within your monthly budget and get the best possible interest rate.
Tips to Lower Two-wheeler Loan Interest Rate
Here are some ways to lower the interest rate of your Two-Wheeler Loan –
- Get rid of all the existing debts before applying
- Plan and make a higher down payment
- Show additional income sources like interest income and rent income, and increase your overall monthly income.
- Improve your CIBIL score gradually and apply for the best rates once it’s above 700
- Consider getting a loan from a lender you already have a good relationship with
- Look for seasonal offers.
Apart from the interest rate, you need to take care of two more points for a hassle-free loan application: the eligibility criteria and required documents.
Two-wheeler Loan Eligibility Criteria
For Two-Wheeler Loans, you must meet the following requirements:
- You must be at least 18 to apply (at the time of submission of the loan application), and the maximum age is 65 (at the time of loan maturity)
- Salaried customers must have worked for the same company for at least a year
- Self-employed customers must have been in business for at least three years
- You must be an Indian citizen
- Your CIBIL score should be decent, i.e., 750 and above is preferable, with a credible repayment history.
A point to remember here is that the eligibility parameters of this credit option will entirely depend on the lender you choose. So, check with the financial institution and meet those parameters to get a loan easily.
Documents Required for Two-Wheeler Loan
Take advantage of the Two-Wheeler Loans’ simple documentation process. Below is a list of potential papers that may be requested based on the profile:
- Application form
- Identity Proof
- Bank Statements
- Address Proof
- If you are a self-employed professional, keep a copy of your Income Tax Returns (ITR) for the last year And Business Stability proof / Ownership proof with other documents.
- If you are a salaried person, keep a copy of the Latest Salary Slip / Form 16 And Employment Stability Proof with other docs too.
Even though these are some of the main things that affect the Two-Wheeler loan interest rate, there may be other things specific to the lender that you should know Visit Here