A two-wheeler loan helps aspiring bike or scooter owners buy their dream vehicle by providing financing at affordable monthly instalments. However, interest rates on two-wheeler loans can vary significantly across different banks and NBFCs.
The vehicle purchased serves as collateral against the loan amount. Two-wheeler loan interest rates typically range from 8% to 30%, depending on the financial institution, applicant profile, loan amount, and tenure.
Choosing the right financial institutions with the lowest interest rate can save thousands of rupees over the loan tenure. This article provides a step-by-step guide to help you get a low-interest-rate two-wheeler loan.
Understanding the Benefits of a Two-wheeler Loan
Before we learn about how to get a low interest rate on a bike loan, let’s understand the advantages of a two-wheeler loan to take the right decision:
1. Requires Low Down Payment
One of the biggest advantages of a two-wheeler loan is that it typically requires a low down payment of just 10-15% of the vehicle cost. This enables buyers to pay the remaining amount in affordable monthly instalments with a low-interest rate bike loan. With a small initial payment, buyers can ride their dream bike home rather than wait years to save up.
For example, if you want to buy a bike costing Rs.70,000 and need more money in hand, you can take a small bike loan of Rs. 25,000 for the down payment. For the remaining ₹45,000, you can convert it into small Equated Monthly Instalments (EMIs) and pay monthly over the loan tenure rather than paying the total amount upfront. This makes an expensive bike much more affordable.
2. Flexible Repayment Period
Financial institutions offer flexible repayment tenures for two-wheeler loans which is typically between 1 and 5 years. One can choose a period that best suits their income and budget. Getting approved for low-interest bike loan options for shorter durations of 12-36 months is beneficial.
3. Boosts Credit Score
Responsible repayment of two-wheeler loan EMIs by the due dates significantly improves the buyer's credit score. This enables cheaper financing options for future loans. First-time borrowers can also build their credit history through a two-wheeler loan.
4. Tax Benefits
The low-interest rate bike loan EMI offers tax benefits under Section 80C of the Income Tax Act. One can claim tax deductions of up to Rs 1.5 lakhs annually against loan interests, thereby reducing their taxable income. However, the tax exemption benefit on two-wheeler loans applies only if the vehicle is used for business purposes.
Step-by-Step Process to Get a Bike Loan with Lowest Interest Rate
Here are some key steps and considerations to help you get the lowest 2 wheeler loan interest rate:
1. Maintain a Good Credit Score
Your credit score plays a crucial role in determining the interest rate for your loan. A higher credit score, typically above 750, can significantly increase your chances of getting a bike loan with the lowest interest rate. Regularly checking and maintaining your credit score by paying existing debts on time and avoiding multiple loan applications can help you secure a low interest rate bike loan.
2. Compare Interest Rates from Different Lenders
One of the most effective ways to find a low interest two-wheeler loan is to compare the offerings of various lenders. Check the rates provided by banks, Non-Banking Financial Companies (NBFCs), and digital lenders. Many lenders provide a two-wheeler loan with the lowest interest rate to attract new customers, so it's essential to research and compare these offers carefully.
3. Choose a Shorter Loan Tenure
The tenure of your loan also impacts the interest rate. Lenders usually offer lower interest rates for shorter tenures. By choosing a shorter repayment period, you can reduce the overall interest payable, making it a low interest bike loan. However, ensure that the monthly EMI amount is affordable for you.
4. Opt for a Higher Down Payment
Making a higher down payment reduces the principal loan amount, which in turn reduces the lender's risk. A lower risk often translates to a low interest two-wheeler loan. By paying more upfront, you can potentially negotiate a better rate and reduce the total interest payable over the loan tenure.
5. Leverage Seasonal Offers and Discounts
Lenders often provide special schemes and discounts during festive seasons or financial year-end sales. These offers can help you secure a bike loan with the lowest interest rate. Stay updated with such promotions and apply during these times to benefit from a low interest rate bike loan.
6. Choose a Secured Loan
Opting for a secured loan where you provide collateral can result in a low interest two-wheeler loan. Collateral reduces the risk for the lender, leading to lower interest rates. However, ensure that you can meet the terms of the secured loan to avoid risking your collateral.
7. Negotiate with Your Existing Lender
If you have a good relationship with your current bank or lender, it’s worth negotiating for a two-wheeler loan with the lowest interest rate. Loyalty, along with a good repayment history, can provide you with an edge in securing a low interest bike loan. Don’t hesitate to discuss the possibilities of rate reductions or special schemes that might be available to loyal customers.
Conclusion
Getting a low interest rate two-wheeler loan in India involves a combination of smart financial practices and proactive research. By maintaining a good credit score, comparing lender rates, opting for a shorter tenure, making a higher down payment, leveraging seasonal offers, choosing secured loans, and negotiating with existing lenders, you can enhance your chances of securing a two-wheeler loan with the lowest interest rate. Remember, the key to saving money lies in careful planning and informed decisions.
FAQs
1. How do you compare bike loan interest rates?
Check the latest interest rates several NBFCs, banks, and other financial institutions offer before applying for a bike loan.
2. What are the rules of a two-wheeler loan?
Two-wheeler loan rules typically require applicants aged 21-59 to provide ID, address, and income proof and have a stable income source to qualify based on creditworthiness for loan terms, including interest rate, tenure, down payment, and penalties.
3. Are there specific NBFCs offering low interest rates on two-wheeler loans?
You can check out Shriram Finance Limited for competitive interest rates on two-wheeler loan.
4. What factors influence the interest rate for a two-wheeler loan?
The interest rate on a two-wheeler loan is influenced by factors such as your credit score, loan tenure, down payment amount, and financial institution policies.
5. Does my credit score impact the interest rate on my two-wheeler loan?
Yes, a higher credit score indicates financial reliability and reduces the perceived risk for financial institutions, often resulting in lower bike loan interest rates.
