Learn to negotiate the best two-wheeler loan terms (by following these tips)
Article by Drivio | 8th Apr 23
Striking a fruitful loan bargain while obtaining a two-wheeler loan can help you save significantly on interest, foreclosure charges, and processing fees. Try to maintain a healthy credit score and choose a short loan tenure to benefit from low-interest rates.
There’s no denying that we all love saving money. When you apply for a two-wheeler loan, how would you pitch your loan bargain to take advantage of favourable terms?
Obtaining a two-wheeler loan serves as the most viable solution to finance your new motorcycle without messing up your savings. As an informed borrower, it pays to know the best loan terms and strike a deal.
Remember, you have dozens of banks and NBFCs out there on the market. How about exploiting the best loan terms to save money in the long term? Apart from low-interest rates, you can take advantage of reasonable foreclosure fees, flexible loan tenures, and minimal processing charges.
In this article, we will show you the best tactics for loan negotiation so that you can benefit from the best loan terms.
6 loan bargain tips for two-wheeler owners
Before going for a two-wheeler loan, follow these guidelines for a better loan negotiation.
1. Shop around and research
The best way to find a lucrative loan bargain is to spend your time doing homework. With proper research, you can identify banks and NBFCs offering different two-wheeler loans are different rates of interest. Apart from this, shopping around will help you understand the processing fees, loan tenures, and foreclosure charges. A stringent approach from your end will help you identify the hidden fees. This way, you can stay away from lenders charging unnecessarily from borrowers.
Next, once you shortlist the top lenders, compare the interest rates to understand the best loan terms. Remember, a lender offering the loan at a low-interest rate might not be the ideal one. Have you factored in the foreclosure charges, processing fees, or other hidden charges? An intelligent comparison will help you negotiate the best loan bargain.
2. Communicate responsibly with your lender
Once you familiarize yourself with the loan terminologies, you can confidently communicate with your lender. Using relevant terms during your interaction will convey a positive image to the other end. Besides, knowing the terminologies will help you communicate exactly what you are looking for.
For instance, borrowers should understand terms like financial covenants, balloon payment charges, upfront transaction costs, loan-to-value ratio, loan tenure, and guarantee. It’s wise to be prepared for loan negotiation and find the best deals.
3. Check out prepayment charges
Most banks and NBFCs charge a fee if you decide to foreclose your loan. Sometimes, changes in your financial stature or income might prompt you to pay off your loan earlier than the agreed tenure. This way, you can save a significant part of the interest.
As you explore the best loan terms, make sure to understand how the bank or NBFC is likely to charge you for prepaying your loan. Most financial institutions would charge a small percentage of the outstanding amount, which is typically lower than the interest rate. They charge this amount because your decision to prepay the loan affects the lender’s cash flow.
However, when you negotiate the foreclosure fee, you can gain flexibility when interest rates are dynamic. When an opportunity surfaces before you to save on interest, you should be able to close the loan without incurring a heavy loss in terms of foreclosure fees.
4. Capitalize on your credit score
Any credit score above 750 can help borrowers qualify for low-interest rates. As you know, banks and NBFCs check the credit report to get an idea of where you stand financially. Bank on a healthy credit score as a part of your loan bargain.
Particularly, if you have a decent track record of repayments, why not strike a deal where your commitment to previous lenders can fetch you a low-interest loan for two-wheelers? A strong report will demonstrate your creditworthiness and low-risk profile.
The best way to go about it is to look out for lenders offering the lowest interest rates. Most of them will specify the necessary credit score to qualify for the mentioned rate. Once you match your credit score with their criteria, simply approach them for a loan.
5. Choose a shorter loan tenure
During your loan negotiation, make sure to choose a shorter loan tenure. Your lender might be ready to provide you with a privilege of a long tenure of up to five years. However, a longer loan tenure comes with higher rates of interest. Closing your loan early can save you thousands.
Lenders consider you to have a high-risk profile when you go for a longer tenure. This is because you would be blocking their capital for a longer period. On the contrary, two-wheeler loans with shorter tenures would decrease the interest component.
However, evaluate your repayment capacity before opting for a shorter loan tenure. Compared to a five-year loan, a two-year loan would involve higher EMIs.
6. Clear existing debts
Do you have any other outstanding debt or ongoing loan? This might be increasing your credit utilization rate, reflecting a lower credit score. Banks and NBFCs prefer lending at a lower interest rate if you don’t have any existing debt. If possible, try to clear off these liabilities to qualify for a lower interest rate.
When you have a lower debt-to-income ratio, you are better poised for negotiating a better loan bargain with your bank or NBFC.
Apart from the tips mentioned above, keep your eyes open for seasonal offers. For instance, many lenders provide two-wheeler loans at discounted rates of interest during festivals or special events.
Besides, check out for company tie-ups with banks and financial institutions. Taking a loan from a certain bank or NBFC might qualify you for a discount or low-interest rate.
Now that you are aware of the best loan terms, you can confidently explore two-wheeler loans. Being an informed borrower, you can save significantly on loans while buying your new motorcycle.
And if you want to avoid the hassle of going through the rounds of negotiations, you can simply visit Drivio and get all these terms pre negotiated. Just fill in your contact info and Team Drivio will serve you the best two-wheeler finance deal.