Table of Contents
- What are the interest rates?
- Whether a two-wheeler loan is a secured or unsecured loan?
- Is any collateral required for a two-wheeler loan?
- What is the LTV for a two-wheeler loan?
- Whether a co-applicant is required?
- Does CIBIL™ score matter in two-wheeler loans?
- Is two-wheeler loan interest deductible under the income tax?
- What are the documents required for a two-wheeler loan?
- If I avail of a two-wheeler loan, will I be eligible for a subsidy from the government in case of an electric two-wheeler?
- How can I know the amount of EMI?
- In A Nutshell
Two-wheeler loans are on the rise with the two-wheeler auto segment seeing a boom. Two-wheelers offer convenience for commuting and are affordable, cost-efficient, and time-saving, especially during traffic. However, buyers have certain confusions regarding two-wheeler loans. Here is a guide to clarify some of the most common confusions that buyers have regarding two-wheeler loans:
What are the interest rates?
The interest rates on two-wheeler loans vary among lenders. However, the interest rate in the two-wheeler loan market starts from just 11.50% p.a. making it affordable for two-wheeler buyers.
Whether a two-wheeler loan is a secured or unsecured loan?
Two-wheeler loans are available as both secured and unsecured loans. It depends on borrowers, whether they want a secured or unsecured loan.
In the case of secured loans, the borrower will need to furnish collateral security. It can be your house, piece of land, any vehicle, or even gold. Secured loans reduce the interest rate for the borrowers, thus reducing the EMIs. However, in case of non-repayment of loan, the lender has the right to claim the collateral security.
In the case of an unsecured loan, the borrowers do not need to furnish any collateral security to the lender. However, in the case of an unsecured two-wheeler loan, the borrower will need to pay a higher interest and other charges for availing the loan thus leading to an increase in the EMI payment.
Is any collateral required for a two-wheeler loan?
If the borrowers have availed personal loan, they must furnish the collateral security and vice-versa in unsecured loans.
What is the LTV for a two-wheeler loan?
The Loan-to-Value ratio, also known as LTV, is the amount of financing that the lender provides compared to the asset's value. In the case of two-wheelers, generally the on-road price is considered for financing. The general industry standard is usually 90%. However, with Shriram Finance, you can avail a LTV of 100% of the two-wheeler value for select vehicles. That means you need to make zero down payment to purchase your dream bike.
Whether a co-applicant is required?
Usually, a co-applicant is not required in the case of two-wheeler loans. However, if the applicant has a weak credit profile, i.e., low CIBIL™ score, or lower-income stability, a co-applicant or a guarantor can increase the chances of getting the loan sanctioned and reduce the cost of borrowing, primarily interest rate.
Does CIBIL™ score matter in two-wheeler loans?
CIBIL™ score depicts the creditworthiness of the borrower that helps the financial institutions assess their repayment capabilities. Therefore, the CIBIL™ score does matter in the case of two-wheeler loans. A lower CIBIL™ score decreases the chances of getting the loan sanctioned. Even if the financial institution sanctions the loan, the interest rate and other charges increase due to a lower CIBIL™ score.
Is two-wheeler loan interest deductible under the income tax?
Usually, the two-wheeler loan interest is not deductible under the Income Tax Act, 1961. However, there are certain exceptions to these.
Firstly, if the two-wheeler is purchased for business, the loan interest can be claimed as a deduction in the form of business expenditure. This will reduce the business profits, leading to tax savings.
Secondly, the government has launched various initiatives to promote electric vehicles. One such initiative is interest deduction on electric vehicle loans under Section 80EEB of the Income Tax Act, 1961. This is applicable for both electric cars as well as two-wheelers. The amount of deduction available is up to Rs. 1,50,000 for each Financial Year.
What are the documents required for a two-wheeler loan?
Two-wheeler loan documentation requirements are minimal. One only needs to furnish the following documents in order to avail of a two-wheeler loan:
1. Identity Proof (any one of the following):PAN Card | Driving Licence | Voter ID Card | Passport
2. Address Proof (any one of the following): Driving Licence | Passport | Gas Bill with Gas Book
3. Other Documents: Passport size Photo | Income Proof | Bank Statement | Cancelled cheque and ACH form for ECS Mandate | Vehicle Registration Certificate, duly endorsed in case of new vehicle
If I avail of a two-wheeler loan, will I be eligible for a subsidy from the government in case of an electric two-wheeler?
The government provides subsidies on electric vehicle purchases. This subsidy depends upon the battery capacity of the two-wheeler and the amount of subsidy differs among the states. Many borrowers fear whether the subsidy benefit will be lost in the case of two-wheeler loans. However, to their relief, even if the two-wheeler buyers go for two-wheeler loans, they can still avail of the subsidy benefit.
How can I know the amount of EMI?
You can pre plan your budget before applying for the two-wheeler loan. Using a two wheeler loan EMI calculator lets you know the exact amount of EMI that you will need to pay. Just enter the loan amount, two-wheeler loan interest rate, and tenure of your two-wheeler loan.
In A Nutshell
While the four-wheeler is still considered a luxury in India, two-wheelers are a necessity for each household. Over the long run, commuting by public transport is time-consuming and costly. Two-wheeler loans have made two-wheelers affordable for each consumer.
The electric vehicle buzz has further boomed the two-wheeler segment considering its benefits. Government subsidy has further strengthened the initiative of rolling out more electric vehicles. Therefore, if you are planning to buy a two-wheeler, avoid a huge cash outflow by going for an easy and affordable two-wheeler loan with Shriram Finance.
