A two-wheeler loan allows people to finance the purchase of motorcycles, scooters, mopeds, and other two-wheeler vehicles. These loans make owning a two-wheeler more affordable by spreading out the cost over the tenure. However, when researching your options, you may encounter some common myths of bike loan.
Shedding light on these myths of two-wheeler loan will help you make an informed financing decision for your two-wheeler purchase. Continue reading to debunk the myths and get to the truth.
Two Wheeler Loan Myths to Avoid
Let’s take a look at some of the myths about bike loans in detail in this section:
Myth 1: There’s Too Much Paperwork Involved
Many people believe applying for a two-wheeler loan requires submitting a big stack of documents and endless paperwork. However, this perception is exaggerated. Most financial institutions only require basic documents, like identity proof, address proof, and financial statements. Typically, you may need to submit:
- A copy of your PAN card
- Your address proof (Aadhaar card/voter ID/utility bill)
- Latest salary slips or bank statements
- Documentation on the two-wheeler you wish to purchase
The entire application often involves filling out a simple form and submitting copies of these basic documents. The paperwork is straightforward compared to loans for buying a car or home.
Myth 2: The Interest Rates Are Too High to Afford
A few years ago, interest rates for two-wheeler loans used to be quite high. However, rates have reduced substantially with increased competition among banks and NBFCs. Most financial institutions now offer affordable interest rates based on customer creditworthiness. This makes EMIs reasonable enough to fit most budgets.
Myth 3: Higher Credit Score Will Guarantee Loan Approval
A good credit score no doubt improves your chances of getting a loan approved. However, it does not guarantee approval. Financial institutions also verify other aspects, such as income stability, existing obligations, collateral ownership, etc. Those with scores below 750 need not feel dejected. Options like secured loans or having a guarantor can enhance eligibility. You can also build creditworthiness gradually through credit builder products before applying.
Understanding these myths of bike loans can help set realistic expectations.
Common Mistakes to Avoid When Applying for a Two-Wheeler Loan
Here are some common mistakes that borrowers should avoid when applying for a two-wheeler loan:
- Not Checking Eligibility Criteria: Not evaluating loan eligibility norms related to income, employment history, age, etc., specific to the lending institution before applying leads to quick rejections.
- Providing Incomplete Information: Missing out or giving inaccurate data in the application pushes the loan into risk assessment, resulting in higher interest rates or declines.
- Not Researching Interest Rates: Failing to compare interest rates across financial institutions may result in being charged higher rates despite good eligibility.
- Not Reading Terms & Conditions: Accepting T&C without reading may lead to overlooking unsuitable clauses around default penalties, foreclosure charges etc.
- Not Estimating Repayment Capacity: Overestimating repayment ability and taking a higher amount for shorter tenure makes EMIs unaffordable.
- Ignoring Credit Score: Not tracking credit scores or taking steps to improve the score before the loan application often leads to unfavourable pricing or rejection.
Eligibility Criteria for Two-Wheeler Loans
The basic eligibility criteria standardised by most financial institutions for qualifying applicants for a two-wheeler loan are:
- Age: The minimum age requirement varies between 18 and 21 years, depending on the bank or NBFCs, while the maximum age limit is generally set at around 58 to 60 years at the time of loan maturity.
- Income: The minimum monthly gross income requirement may vary with the lender but ranges mostly between ₹15,000 and ₹25,000 per month.
- Employment: Employed individuals seeking two-wheeler loan financing are generally required to have a minimum of six months of history with their present organisation. On the other hand, self-employed applicants need proof of two to three years in current business.
- Residence: To ascertain the applicant's loan repayment capabilities, most financial institutions expect a minimum of 1-2 years of residence stability within the same city/locality as per documented address proof.
- Credit history: Banks and NBFCs assess the applicant's credit record, and only those with a demonstrated good credit history with minimum credit scores, which may vary according to the lending institution, are considered loan-approval worthy.
- Documentation: Financial institutions mandate basic documents such as ID proof, address proof, and statements supporting applicants' income levels to prove eligibility and verify KYC compliance while processing two-wheeler loan applications.
Conclusion
Many myths of bike loans unfairly discourage people from applying for affordable two-wheeler loans. However, qualifying for these loans is easier today thanks to lower interest rates, minimal paperwork requirements, and flexible policies that cater to diverse customer profiles. Rather than assuming you won’t qualify, check your options; you may be pleasantly surprised.
The right financial institution, like Shriram Finance, offers transparent terms, competitive interest rates, and a streamlined process tailored to your needs. So, don't let misconceptions hold you back; explore your options with Shriram Finance and find a loan that suits your budget and lifestyle perfectly.
Frequently Asked Questions
1. Is Defaulting on a Loan a Crime?
No, defaulting on an EMI itself is not a criminal offence. However, not paying EMIs impacts your credit score, and the financial institution may initiate recovery proceedings. Inform your bank or NBFC if repaying is difficult due to financial hardship.
2. What is the Biggest Myth of Bike Loans?
The biggest myth is that two-wheeler loans are only for salaried people with high incomes. However, banks and NBFCs offer customised loans catering to young professionals, self-employed, gig workers and businessmen through various credit assessment methods.
3. Is It a Loss for Me to Take a Bike On EMI?
Not really. While paying interest does add to costs, EMIs make the two-wheeler more affordable by splitting the cost over months or years. This allows you to start using your own vehicle right away instead of waiting to save the full amount. Evaluate interest rates and tenure options to optimise costs and dispel the bike loan myths.
4. Can I Prepay My Two-Wheeler Loan Before the Tenure Ends?
Yes, most banks and NBFCs allow you to prepay your two-wheeler loan before the end of the tenure. However, some financial institutions may charge a prepayment penalty or fee for closing the loan early.
5. Do I Need to Have a Co-Applicant to Get a Two-Wheeler Loan?
Not necessarily. While having a co-applicant like a parent or spouse can strengthen your application and get you better terms, it is not mandatory. If you meet the financial institution’s eligibility criteria regarding age, income, and credit score, you can apply independently.
