By Master James 
Speed, comfort and thrill are some of the main reasons as to why youngsters prefer two-wheelers, and hence explore ways and means to purchase one. Given the rising cost of bikes over the recent years, a two wheeler loan emerges as a suitable financial solution. However, what renders this loan truly affordable is a low two wheeler loan interest rate owing to its ability to pull down the EMI by several notches. Therefore, while checking the two-wheeler loan eligibility criteria, you can stretch the research a little more to explore factors that impact the loan’s interest rate.
As per the current norms, your ability to secure the best two wheeler loan interest rate would depend on the following factors –
Monthly/Annual income – Lenders use this factor to assess your ability to repay the loan within the stipulated tenure. To this effect, they prefer higher income levels not just for granting approval but also for levying a relatively lower rate of interest.
Outstanding debts – Do you have any pending EMIs from previous loans? If yes, it might cause the lender to doubt your capability and have an adverse impact on the rate of interest. Ideally, clear all the pending EMIs before applying for a two-wheeler loan so that there is nothing outstanding against your name to hamper the chances of approval.
Percentage of down payment – Although lenders offer the option of zero down payment loan, your willingness to pay a certain amount can make a lot of difference. Paying upfront might cause you to dip into personal savings, but depending on the amount, it can also fetch a lower interest rate.
CIBIL score – Where you stand on the CIBIL rating scale can impact the various terms and conditions of the two wheeler loan, including the interest rate. To be in a good bargaining position with the lender, you must strive for a high score through timely payments and no defaults. Such a score would also enhance your financial reputation and convince lenders of your financially responsible nature. As a result of this positive impression, they would lower the rate of interest on your two-wheeler loan.
Tenure for repayment – The duration over which you have to repay the loan to the lender is referred to as the tenure. Usually it varies between one and four years, although this factor may differ from one lender to another. Impact of this factor on the two wheeler loan interest rate is best understood through risk assessment, wherein the lender can lower the rate if the perceived risk is minimal.
For example, if you are confident of paying the entire loan within the shortest possible tenure, a lender would interpret it as reduced risk of default. Hence, they would be willing to grant you a lower rate in lieu. Likewise the vice versa also holds true, wherein a longer tenure would attract a higher interest rate.
Tips for securing a suitable rate of interest
Armed with the knowledge of factors that can affect the two wheeler loan interest rate, your next agenda should be to become eligible for the same. Listed as follows are ways by which you can improve the two-wheeler loan eligibility for a lower rate of interest –
- Minimize your debts, especially in proportion with your income, by paying off past loans so that you are able to retain a large portion of your earnings.
- Make a higher down payment while purchasing the two wheeler, as doing so would reduce the amount to be borrowed as loan, and also lower the interest rate.
- Check your financial situation and judge how soon it would allow you to repay the loan. The sooner it is, the better it would be for you as a shorter tenure would translate into lowering of interest rates.
- Pay your bills on time and have a clean financial history, both of which would boost your credit score, and enable you to bargain with the lenders on interest rate and several other aspects.
- Be on the look-out for pre-approved loan offers, which are available for short durations, but provide extremely attractive terms, one of them being minimal interest rates and low EMIs.
- Compare interest rates of various players in the niche and having established two-wheeler loan eligibility, identify one which offers the most affordable deal.
Final thoughts
Rather than rely on family and friends for financing your dream bike, avail of a two-wheeler loan and accrue the multiple benefits. A word of caution at this point pertains to seeking a loan from an accredited and certified lender who falls well within the regulatory framework. In addition to granting you a lower two-wheeler loan interest rate, such a lender will also render you privy to privileges like free servicing and extended warranty.
So, even if you fall short of the two-wheeler loan eligibility criteria, work on the factors and tips that impact the interest rate. It might take a bit longer, but the deal would be far better than any offered by an unauthorized lending party.