Opting for a two-wheeler loan? First compare interest rates from different banks
Article by Drivio | 29th Jan 23
Owning a two-wheeler comes with some associated expenses like parking, maintenance, and fuel costs. If you are taking a two-wheeler loan to purchase the vehicle, it makes sense to explore the low-interest offers. This way, you would be paying a lower EMI each month to your bank or NBFC.
Currently, motorcycle insurance rates range from 6.85% to 28.30% per year, depending on your profile and the lender. So, why not try and settle for the most affordable loans to repay? Owning a two-wheeler shouldn’t weigh heavy on your pocket if you manage to find the best interest rates.
In this article, we will discuss how lenders calculate your interest rates on two-wheeler loans, and how you can reduce your EMI.
How much EMI do you have to pay when you take a two-wheeler loan?
Your EMI is the amount that you would be repaying to your lender every month, including the principal and interest amounts. This EMI varies depending on the loan tenure that you select. It also depends on your prepayment patterns and the associated processing fee.
Before applying for a two-wheeler loan, you need to find the EMI. So, you need to compare the existing interest rates from different banks and NBFCs and find out the lowest interest rates that you qualify for. Having a healthy credit score and a clean repayment record can help you obtain low-interest loans.
It's wise to use a two-wheeler loan calculator to find out the EMI that you would be paying. Lenders use different parameters based on your eligibility to calculate this EMI.
What parameters determine your two-wheeler loan interest rate?
Let’s have a look at the factors that determine the interest rate of your two-wheeler loan.
Your credit score goes a long way in defining your eligibility for a two-wheeler loan. With most creditors, you can qualify for a low-interest loan if your credit score looks good. However, if your credit score is not too lustrous, you need to pay a higher rate of interest.
Level of income
Each lender expects the borrowers to have a consistent source of income every month. If you have a higher source of income, you would be eligible for your loan faster. Besides, this will help you qualify for a lower interest rate.
Your employment status or where you work determines the interest rates. So, if you are employed at a reputed company and enjoy a better job stability, you can qualify for lower interest rates. The reason is, banks consider financially stable people to be responsible borrowers. Better financial stature also ensures timely repayment of the loan. Whether you are salaried or self-employed also determines the interest rates.
The age of borrowers significantly determines the interest rates. In case you are in your fifties and are close to your retirement age, you need to pay higher interest rates for two-wheeler loans. When you near your retirement age, your capacity to repay the loan might be lower.
Relationship with the creditor
Having a healthy relationship with the lender will help you qualify for low-interest loans. Particularly, if you paid off your previous loans on time, you may qualify for a lower rate for your two-wheeler loan when you obtain it.
What to consider before you apply for a two-wheeler loan?
Apart from the rate of interest on your two-wheeler loan, you have some other aspects to consider as well. These include:
Most lenders charge a one-time fee for processing your two-wheeler loan. The higher the processing fee, the higher would be the overall amount you repay each month. So, even if you qualify for a low-interest loan, paying a higher processing fee can escalate your expenses. It makes sense to select a bank or NBFC that would process the loan at a lower fee. Also, check out for seasonable offers where banks waive off the processing fee. Obtaining your motorcycle or scooter loan within this window can help you keep your expenses low.
Banks and NBFCs set some specific eligibility criteria based on which they process your loans. The criteria for some lenders tend to be stricter. With NBFCs, you can enjoy some degree of leniency when you obtain these loans. So, it makes sense to go for a creditor whose eligibility requirements you can fulfil. This way, you will be able to qualify for a low-interest loan for your two-wheeler.
At times, you may want to prepay your existing two-wheeler loan so that you can save on your interests. However, most lenders will charge a fee if you want to pre-close the loan. Before you apply for the loan, consider the amount you need to pay if you want to prepay the amount. In the process, you can keep the process of foreclosure cost-effective.
Transparency in dealings is what borrowers expect when they take loans to purchase their two-wheelers. This way, they can secure themselves from surprise charges. Apart from the processing fee, find out the penalties and fines for missed payments. Also, find out whether you need to pay any other charge apart from your EMI.
Special offers and discounts
Look out for special interest rates and discounts that you can qualify for when you obtain a two-wheeler loan. You can qualify for these discounts during festive seasons. With such privileges, you can enjoy lower interest rates and better repayment terms.
Qualifying for a low-interest rate for your two-wheeler loan becomes easier when you maintain a healthy credit profile. Before we conclude, here are some tips that should help you obtain your loan without any glitches.
Check out the disbursal time that your creditor would need to process your loan. In case you need to make an immediate purchase, you should get the amount disbursed fast. Also, go for a bank or an NBFC offering reliable customer service.
This ensures that you can address your issues at the desk and get them resolved on time. Factoring in all the associated costs along with the interest rate, you can get a realistic perspective on the monthly EMI you would have to pay.