In light of growing gasoline prices, two-wheelers are thought to be cost-effective. Therefore, it is a popular form of transportation for Indian families. When you borrow money to purchase a two-wheeler, your credit score increases if you make your loan repayments on time. When you are short on funds or want to buy your vehicle but don’t want to deplete your savings, getting a two-wheeler vehicle loan can help. Here are some tips to assist you get the best rates on a two-wheeler loan before you apply for one.
Tips to avail best rates on two-wheeler loan
Maintain a good credit history
Your ability to obtain a bike loan depends heavily on your credit score. The likelihood of receiving a loan with a low interest rate is reduced if you don’t have a strong credit score. Before you apply for a loan, make sure your credit history is good.
Take out a loan from the bank you have a good relationship with:
Consider requesting a loan for a two-wheeler from the bank where you already have a savings account. You may be able to secure two-wheeler loans with cheaper interest rates if you have kept a strong relationship with them.
Have low debt-to-income ratio:
Before requesting a new vehicle loan, examine your debt-to-income ratio. Reduce the amount of outstanding debts to lower this ratio. The portion of present income used to pay off credit card debt and other debts is included in this ratio. If you have a low ratio, your chances of obtaining reasonable interest rates are excellent.
Compare the interest rates
Different banks have different two-wheeler loan interest rates and fees. Therefore, before applying for any two-wheeler loans, it is a good idea to compare the available options.
Examine the loans’ interest rates, processing costs, and other fees, including penalties, prepayment, pre-closure, late payment, and other fees.
Utilize special offers
Most banks occasionally provide unique promotions. During holiday seasons like the new year, Independence Day, Diwali, and others, you can save money. You can obtain a two-wheeler loan at a competitive interest rate, and further offers may result in zero loan processing fees.
Check for pre-approved loan offer
Your bank may provide you a pre-approved two-wheeler loan if you have a strong track record with your bank account and keep up a good financial relationship with them. You will typically get in advance information regarding the loan amount, interest rate, and fees for these loans.
The processing of pre-approved loans is swift. Banks contact, text, and email customers to let them know about pre-approved loans. By logging into online banking, you can also search for preapproved offers.
Check the tie ups
You can obtain a two-wheeler loan by selecting the lender on your own or by determining whether they have exclusive relationships with banks or NBFCs. Many times, lenders have connections to two-wheeler companies that could waive processing costs, move the loan around quicker, and charge a lesser interest rate.
The loan products offered by these lenders with affiliations and the loans offered by other financial institutions should be compared. You can select the ideal credit product in this manner.
In situations where you don’t entirely meet the eligibility requirements for loans, negotiating with your bank can assist you obtain better interest rates.
Factors that affect the interest rates
Numerous factors influence the loan’s interest rate, but not all of them do so in the same way.
Some factors have a smaller effect than others, and vice versa. Here are a few of the key variables that affect two-wheeler interest rates.
Amount of the loan
One of the most important aspects of a bike loan is the loan’s amount. The interest rate would increase if the loan amount were bigger. Low amounts will result in low interest rates. To achieve this, all other variables must remain unchanged.
The time frame within which the entire loan amount, along with interest, must be repaid is known as the loan’s term. In general, a longer loan term results in cheaper interest rates and vice versa, but you will end up paying more interest overall. To secure the best two-wheeler loan interest rate, it is crucial to choose the ideal loan tenure.
Your credit score is one of the key variables that affects the interest rate on a two-wheeler loan. A strong credit score may enable you to obtain a loan with a lower interest rate, whereas a bad credit score may result in the rejection of your application or higher interest rates.
Type of employment
Financial organizations set the interest rates for two-wheeler loans based on the borrower’s work status, such as self-employed or salaried. Compared to self-employed individuals, persons who are salaried would receive two-wheeler loans at a cheaper interest rate.
The age of the applicant has a significant impact on the interest rate for a two-wheeler loan. Because your ability to repay a loan may be lower than that of younger people, a higher interest rate will be assessed if you are getting close to retirement age.
Equated Monthly Installments (EMIs), loan amount, interest rate, and loan tenure are all tightly related to one another because they each have an effect on the other. A reduced interest rate may result from more EMIs, but the total amount could go up.
Loans for two-wheelers come with cheaper interest rates. Always examine the interest rates provided by several lenders and select the one that best suits your needs, keeping in mind additional aspects such as processing costs, fines, pre-closing costs, the lender’s reputation, and so forth.