Smart Tips To Avail Best Rates On Your Two Wheeler Loan

Two-wheelers are regarded as cost-effective amidst rising fuel costs. So, it is a preferred mode of transport among Indian families. Taking a loan to buy a two-wheeler not only helps you buy a two wheeler but also improves your credit score if you repay your loan on time.

Taking a two-wheeler loan helps you to purchase your favorite vehicle without disturbing your savings or when you have a cash crunch to buy your two wheeler. Before you apply for a two-wheeler loan, here are some guidelines to help you avail the best rates on a two-wheeler loan.

Tips To Avail Best Rates On Your Two Wheeler Loan

Maintain a good credit history:

Credit score plays an essential role in the bike loan interest rate you are offered. If you don’t have a good credit score, the chances to get a low interest rate on loans are lower. Make sure your credit history is good before you apply for a loan.

Take the loan from the financial institution with which you have good relations:

Try taking a two wheeler loan from the bank in which you already have a savings account. If you have maintained a very good relationship with them, you can get lower interest rates on two wheeler loans.

Have a low debt-to-income ratio:

Check your debt-to-income ratio before applying for a new loan. Clear off existing loans and decrease this ratio. This ratio includes the part of present income that is used for repaying credit card bills and other loans. The probability of getting affordable interest rates is high if you have a low ratio.

Compare Interest Rates:

Interest rates and charges on two-wheeler loans varies across banks. So, it is wise to compare the various two-wheeler loans available before applying for them.

Compare the loans based on factors like interest rates, processing fees, and other  charges such as penalties, pre-payment charges, pre-closure charges, late payment fees, etc.

The interest rate on two-wheeler loans in the table below will help you compare interest rates and find the most suitable loan product as per your requirement

Utilize special offers on two wheeler loans:

Most banks come up with special offers every now and then. You can get a good deal during festival times like new year, independence day, Diwali, and so on.  You can get a two-wheeler loan at an attractive interest rate, and the loan processing charges may be zero along with other offers.

Check For A Pre-Approved Two Wheeler Loan Offer:

If you have a good record with your bank account and maintain a good financial  relationship with your bank, then your bank may give you a pre-approved two wheeler loan. Usually, in these loans, you will get advance information about the loan amount, interest rate, and charges.

Pre Approved loans are processed quickly. Banks inform their customers about pre-approved loans through emails, SMS, and phone calls. You can also look for preapproved offers by logging into online banking.

Check The Tie Ups:

You can get a two wheeler loan either by choosing the lender by yourself for the loan or checking if they have exclusive tie ups with banks or NBFCs. Often, lenders have tie-ups with the two wheeler companies who may give a waiver in processing fees, process the loan quickly, and levy a lower interest rate.

You should compare the loan products given by these lenders who have tie ups and the loans provided by other financial institutions. In this way, you can choose the best loan product.

Negotiate–

Negotiating with your bank can help you avail better interest rates in cases where you don’t completely fulfill the eligibility criteria for loans.

Factors That Affect Two Wheeler Interest Rates

There are a lot of factors that affect the interest rate of the loan, but not all of them affect it in the same way.

Some factors have a lower impact while some have a higher effect. Here are some of the major factors that have an impact on two wheeler interest rates.

Amount Of The Loan

The quantum of the loan is one of the most crucial factors of a bike loan. If the loan amount is higher, then the interest rate would also be higher. If the amount is low, the interest rate will also be low. However, for this, all the other factors must be constant.

Loan Tenure

The duration of the loan is the time in which the loan amount has to be repaid in full including the interest. A longer duration means a lower interest rate and vice versa, but you will have to pay more interest in totality if the loan period is too long. Therefore, it is important to select the perfect tenure of the loan to ensure the best two wheeler loan interest rate.

Credit Score

One of the most important factors that determine the two wheeler loan interest rate is your credit score. If you have a good credit score, you may be able to get a lower interest rate and if your credit score is bad, you may face an application rejection or may be charged a higher interest rate.

Type of Employment

Financial institutions give two wheeler loan interest rates based on the employment type being self-employed or salaried. Salaried people will get two wheeler loans at a lower interest rate compared to the self employed.

Age

The applicant’s age is a crucial factor that determines the two wheeler loan interest rate. If you are approaching the retirement age, a higher interest rate will be levied because your capability to repay a loan may be lower compared to young people.

EMIS

Equated Monthly Installments (EMIs), the quantum of loan, interest rate, and the tenure of the loan are closely associated as each one of them impacts the other. A larger number of EMIs may mean a lower interest rate but the amount may increase.

Conclusion

You can get a lower interest rate on two wheeler loans. Always compare the interest rates offered by various lenders and choose the best that is suitable to you while also considering the other factors like processing fees, penalties, pre-closure charges, credibility of the lender and so on.

Additional reading – When Should You Get An Additional Credit Card?