Owning a two-wheeler or bike gives a sense of freedom to the buyer. It allows the owner to move around conveniently and enjoy the riding time rather than staying stuck in traffic jams. Considering the increasing demand for two-wheelers due to increasing fuel prices and traffic congestion, several lending institutions have made them easy to buy with their two-wheeler loans. They have a reasonable bike loan interest rate, allowing borrowers to repay at their convenience in flexible repayment terms.
Undoubtedly, getting a bike loan is a thoughtful approach to owning a bike of choice. It will reduce the burden of paying its price at one go, making the purchase pocket-friendly and more affordable. So, while considering taking a loan to purchase the dream bike, here are some crucial pointers you must know about their eligibility, documentation, benefits, etc.
Applying for a bike loan has numerous benefits. We are discussing some of them below:
- Reduced Burden: A bike loan reduces the borrower’s burden of paying the bike’s total price upfront. A bike loan calculator canhelp the borrower plan their repayment and pay off the debt without any financial crunch.
- Easy Loan Approval: With fierce competition among loan providers, getting a bike loan approval has become extremely easy and stress-free, provided the applicant fulfils the lender’s eligibility criteria.
- Increased Credit Score: Since bike loans involve small amounts with flexible repayment terms, they are easier to repay during a loan tenure with affordable EMIs. The reasonable bike loan interest rate does not unnecessarily increase the bike’s cost. Therefore, it is an excellent way to build and improve credit scores.
- Fast Processing: Bike loans require minimal paperwork, and their application process speed is quick and straightforward. Aspiring borrowers with all the valid documents can get their loan approval quickly.
- High LTV Ratio: Those planning to purchase a bike do not need to pay its price upfront. With a high LTV ratio of up to 95%, buyers don’t need to save substantial amounts before entering the showroom.
Every lending institution has unique eligibility criteria based on the applicant’s age, income, DTI ratio, etc. These are the basic eligibility conditions that most NBFCs follow:
- Indian citizens over 18 years of age
- Salaried employees with at least one year of total work experience and six months in the current company
- Self-employed professionals running the current business for a minimum of one year
- A decent credit score
Aspiring borrowers must provide a few documents to apply for a bike loan. They may vary between lending institutions, but these are some general documents that most lenders require:
- Loan application form
- Passport-sized photograph
- Age proof, like a birth certificate, PAN card, passport, or driving license
- Identity proof, like Aadhaar Card, PAN card, passport, driving license, or a government ID card
- Residence proof, like Aadhaar Card, driving license, passport, ration card, utility bill, or municipal or property tax receipt
- Income proof for salaried employees, like salary slips, salary account bank statements, salary certificates, Form 16, job offer letters, evidence of job continuity, or experience certificates from previous employers
- Self-employed professionals must provide their office address proof, like maintenance bills, property documents, utility bills, rent agreements, MSME or SSI registration certificates, etc. They also need to submit their business existence proof, like Tax Registration, Company Registration Certificate, or Shop Establishment Proof. For income proof, they must provide their recent ITR and bank statements.
Understanding the bike loan advantages is just one block of getting a two-wheeler loan. It’s crucial to consider these factors before submitting the application form:
- Loan Amount: Deciding on an appropriate loan amount is essential before applying.
- EMI: Several factors determine the EMI, like interest rate, loan tenure, and loan amount. Use a bike loan calculator to compute the EMI amount you must pay each month.
- Processing Charges: Since processing charges can affect the total loan cost, enquire about them before applying for a bike loan.
- Prepayment Charges: There might be times when the borrower wants to pay the loan early, as it can save them money and make them debt-free. Enquire about prepayment charges to enjoy the maximum benefit of prepayment.
- Disbursal Time: Depending on how technologically-advanced the NBFC is, some take days while others disburse loans in minutes.
Borrowing a bike loan is not the last step in acquiring the dream bike. A considerable percentage of borrowers default on their loan repayment, which results in increasing their penalty charges and bringing their credit score down. So, here are a few precautions one must take to ensure timely EMI repayments:
- Use a bike loan calculator to opt for a loan term with budget-friendly EMIs.
- Although lenders may fund up to 95% of the bike’s cost, borrowers must make the maximum possible down payment from their pocket to reduce the loan burden.
- Opting for a shorter tenure will increase the monthly EMI amount but save money on the total interest outgo.
- Choosing an auto payment mode will automatically deduct the EMI amount from the borrower’s bank account, minimising the chance of missing or delaying EMIs due to negligence.
- It’s crucial to create a balance between using the income money for necessities, desires, and savings. According to the popular 50/30/20 rule, one must use 50% of their income on necessities, 30% on the things one desire but don’t need, and 20% on savings.
- Those who receive extra money from bonuses, gifts, or rewards must utilise it to prepay the loan, even if it means paying nominal prepayment charges.
A two-wheeler loan helps people buy the bike, scooter, or motorcycle of their choice and pay its price in EMIs. Available for both salaried employees and self-employed professionals, these are easy to avail and can fund up to 95% of the bike’s cost. Choose the lowest bike loan interest rate and bring the desired bike home without paying its price upfront.