The benefits of taking a two-wheeler loan from an NBFC

The choice of your two-wheeler loan provider goes a long way in defining your ease of repayment. Do you know that as much as 75% of motorcycles in India are purchased through loans?

Right from qualifying for the financial privilege, loan processing, and getting lower interest rates, it pays to stick to the right lender. Obtaining a loan from a bank or an NBFC, it’s easy to finance your motorcycle. Besides, bike loans happen to be a popular means of financing these purchases. 

Well, you might land in a dilemma, thinking about whether to approach a bank or an NBFC to finance your two-wheeler. It’s time to understand the NBFC loan advantages, given that there are several myths stating that bank loans involve lower interest rates.

In this article, we have comprehensively discussed the loan benefits of NBFCs over banks.

The difference in interest rates between banks and NBFCs 

To understand all the NBFC loan advantages, borrowers should understand how banks and NBFCs work in the first place.

As financial institutions, both banks and NBFCs are regulated by the RBI (Reserve Bank of India). However, the acts governing banks and NBFCs differ. While banks need to adhere to the Banking Regulation Act of 1949, NBFCs comply with the Companies Act, 1956. As a result, NBFCs enjoy the privilege of more leniency during their operations.

So, banks habitually comply with the guidelines that RBI provides them with. The interest that banks charge on two-wheeler loans may vary according to the RBI policies and corresponding forces in the market. 

However, RBI doesn’t decide the interest rate that NBFCs can charge. Rather, the actions of NBFCs depend on the RPLR (retail prime lending rate). Therefore, NBFCs are better poised to compete with banks by offering competitive rates of interest. Naturally, these financial institutions can offer better loan benefits in terms of lower interest rates to their clients.

NBFC loan advantages: Why NBFCs fare better than banks?

Apart from offering competitive rates of interest, NBFCs offer several advantages to borrowers. Let’s explore the NBFC loan advantages over banks in this section.

1. Faster loan processing

Both public and private banks are stringent with bike loan processing. Most of these institutions are skeptical while examining the borrower’s creditworthiness and eligibility. So, you might find it challenging to qualify for a bank loan if your documents are not in place or your eligibility criteria are not to the standards.

NBFCs, on the other hand, tend to be more forgiving or lenient. These institutions uphold the consumer’s convenience while disbursing loans. So, you can even find same-day loan disbursement NBFCs, where the approval process is completely online. Moreover, borrowers can qualify for loans from these two-wheeler loan providers with minimum documents.

2. Longer repayment tenure

When you apply for a bike loan, most banks would fix the loan tenure between 36 months and 48 months. With NBFCs, you can qualify for longer periods, up to 60 months or five years. In some cases, NBFCs also lend for 7 years, which implies that your monthly monetary outflow would be lower. If you are financially stressed, it pays to go for a longer loan tenure. Rather than repaying the loan in two to three years to your bank, you would be financially at ease with an NBFC.

3. Loan eligibility

Banks are habitually strict at evaluating loan eligibility by factoring in your credit score. This approach from banks is based on their adherence to the guidelines of RBI. So, if your credit score doesn’t look too good, or something close to 750, you might not qualify for a two-wheeler loan from banks. 

NBFCs, on the other hand, can process two-wheeler loans even if you have a credit score as low as 600. These institutions deploy a more dynamic and realistic methodology based on AI and ML to determine whether you are likely to repay on time.

4. Lower down payment

With banks, be ready to shell out a down payment of at least 20% while they process your bank loan. This often takes a financial toll on the borrower. After all, you have been seeking the loan just because you need financial assistance. What’s the point if you have to shoulder 20% of the expenses yourself?

One of the prime loan benefits of NBFCs is that they charge a lower down payment. In some instances, they can even finance 100% of your purchase. You simply need to pay an equal EMI to clear your debt.

5. Better financial flow

Have you factored in additional expenses like insurance premiums and RTO while purchasing your two-wheeler? Apart from financial 100% of the price of the motorcycle, NBFCs also include these associated costs in their loans. This ensures a better financial flow for the borrower. After receiving the comprehensive amount from the NBFC, you simply need to pay the EMIs to maintain your creditworthiness.

 Should you approach a bank or an NBFC for a two-wheeler loan?

 Well, your decision regarding choosing the right two-wheeler loan provider is crucial. Make sure to consider associated charges like processing fees, foreclosure charges, and late fines. A careful evaluation of these factors will help you choose the right lender for your two-wheeler loan.

We have already discussed the tactical advantages of obtaining a two-wheeler loan from an NBFC rather than a bank. With a longer repayment window, reasonable interest rates, and instant disbursement, you get to enjoy greater financial freedom with NBFCs. Considering these loan benefits, it would be a logical decision to approach NBFCs for your two-wheeler loan.