Buying a two-wheeler is an important milestone in life. But not everyone can pay for the dream ride in a single go. Two-wheeler loans allow people to get their preferred bikes or scooters by breaking the cost into monthly instalments. But before getting a financing option, the bike loan interest rate influences how much you pay. This article provides insights into the interest rates from non-banking financial companies for two-wheeler loans.
Factors Affecting Two-Wheeler Loan Interest Rates
Several factors come into play when determining the interest rates for two-wheeler loans offered by NBFCs. Here are some of the key factors:
- Credit Score: Loan providers see individuals with higher credit ratings as less risky, offering them lower interest rates. A credit score on the higher end can help you secure an attractive rate, while a poor score may lead to a higher rate or even loan rejection.
- Loan Amount and Tenure: The tenure and loan amount may also impact the interest rate. Smaller loan amounts or shorter repayment tenures may attract lower interest rates. On the other hand, larger amounts or longer tenures could attract higher rates due to the increased risk for the loan provider.
- Down Payment: If you can pay a larger down payment upfront, the risk for the loan provider will be reduced. As a result, loan providers may offer you a lower interest rate since the loan amount becomes smaller.
- Type of Bike: The kind of two-wheeler you're buying can also affect your interest rate. High-value bikes or premium models may have different rates than lower-priced, budget-friendly models. Loan providers might offer lower interest rates for new bikes or well-known brands as they are less risky.
- Your Relationship with the Loan Provider: If you have a history of timely repayments or an existing relationship with the NBFC, you may be able to negotiate a better interest rate. Loan providers offer favorable rates to loyal customers with good repayment track records.
- Market Conditions: Interest rates are also influenced by the current economic climate. When the Reserve Bank of India (RBI) adjusts its benchmark rates, NBFCs typically follow suit and modify their interest rates accordingly. During periods of inflation, rates might increase, while during deflation, they could decrease.
Fixed vs. Floating Interest Rates for Two-Wheeler Loans
When applying for a two-wheeler loan, you may be given the option of choosing between a fixed or floating interest rate. However, not many lenders offer a floating rate of interest for two-wheeler loans. Please check with the lender for more details. Let's explore the differences between the two:
- Fixed Interest Rate: Your monthly EMI will stay the same, making it easier to plan your finances. The predictability of fixed rates can relieve borrowers, especially when rising interest rates. However, fixed rates are usually higher than floating rates because they provide more stability and security.
- Floating Interest Rate: A floating interest rate is tied to market fluctuations and changes in the loan provider's base rate. This means your interest rate can go up or down depending on economic conditions and the RBI's monetary policy. You may benefit from a reduced interest rate if market conditions are favorable. However, the risk with floating rates is that your EMI may also increase if interest rates rise. Floating rates tend to start lower than fixed rates but come with the uncertainty of future fluctuations.
Tips for Getting the Best Interest Rate on Your Two-Wheeler Loan
There are steps you can take to ensure you get the best deal possible:
- Maintain a Good Credit Score: A healthy credit rating is one of the best ways to qualify for a lower interest rate. Check your credit standing before applying for a loan and work on improving it if needed.
- Compare your loan options: Don't settle for the first loan provider you come across. Different NBFCs may offer different rates and loan terms, so comparing the options is wise. You can use online loan comparison websites to evaluate interest rates and loan offers from various loan providers.
- Opt for a Smaller Loan Tenure: While longer tenures may lower your monthly EMI, they come with higher interest rates. If you can manage to pay a significant chunk every month, consider opting for a shorter tenure to get relief from the overall interest burden.
- Increase Your Down Payment: The more you pay upfront, the less you have to borrow. This reduces the loan amount, making you less of a risk for loan providers and lowering your interest rate.
- Consider a Co-Applicant: If your credit rating is less than ideal, consider adding a co-applicant with a better credit score to enjoy a lower interest rate.
Conclusion
When it comes to two-wheeler loans from NBFCs, understanding the interest rates is key to making an informed decision. Remember, a little effort upfront can go a long way in reducing the overall cost of your two-wheeler loan.
