Bike loans are the best financing options to own a two-wheeler without exhausting your savings and stretching your finances. Bike loans make it easier to purchase a scooter or bike without paying total cost upfront. Additionally, they are convenient and quickly repayable with flexible repayment terms and affordable EMIs. However, when you plan to purchase a bike using additional financial assistance, the most important thing to consider is the 2 wheeler loan interest rate.
Interest rate is the most crucial factor that determines your loan affordability. Even a minor difference in the interest rate may considerably reduce the loan instalments. The interest rate you receive depends on several factors. Understanding them helps you improve your eligibility and get the best loan deal.
Here are the numerous factors that come into play when determining your bike loan interest rate.
Down Payment: Down payment is a portion of the cost you must pay above the loan amount. Most lenders finance only 70-75% of the bike’s cost. However, Hero FinCorp offers an LTV ratio of up to 95%. The remaining 5% you must pay as down payment.
A higher down payment reduces your bike loan interest rate since your loan plan has a lower risk involved for the lender. Moreover, it reduces your debt obligation, makes your EMIs more affordable, and helps clear your debt faster.
Income: Your earnings are vital factors affecting your 2 wheeler loan interest rate. Lending institutions compare your monthly income with your existing financial obligations and ensure you can conveniently adjust the bike loan EMIs in your budget. They gauge the risk involved in your loan scheme according to your repayment capacity.
Usually, financial institutions prefer salaried individuals due to their credible and stable income source. However, NBFCs like Hero FinCorp also provide bike loans with attractive interest rates to self-employed professionals. Moreover, they have a very low minimum income requirement of only Rs 10,000 per month to qualify for a bike loan. That means you can obtain a favourable bike loan scheme with attractive interest rates if you fulfil this condition.
Bike Type: When evaluating your loan application, the lender will consider your bike type to determine your 2 wheeler loan interest rate. That is because the type of bike you choose affects its cost and, eventually, the loan amount you need to borrow. The costlier the motorcycle, the bigger the loan amount you may apply for.
High-performance and luxury bikes usually have lower interest rates due to the higher loan amount. Moreover, popular bike models have a higher resale value, allowing lenders to recover their money easily in case of a loan default. Therefore, they attract lower interest rates than budget-friendly bikes with low resale value.
Repayment Tenure: Bike loan providers offer flexible repayment terms of up to 60 months to repay the borrowed amount. From the lender's perspective, choosing a longer tenure to repay the loan will increase the chance of loan default, increasing the risk of lending.
Any loan plan deemed risky attracts a higher interest rate, justifying the lender’s risk and letting them cover the incurred losses. Therefore, use a Bike Loan Calculator and opt for the shortest possible loan tenure to attract a lower interest rate and repay the loan faster. However, a shorter tenure will increase your EMI amount, making its monthly payment challenging. Therefore, choose the shortest possible tenure with budget-friendly EMIs using an EMI calculator.
Work Experience: Your work experience helps a lender understand your professional and financial stability. Sufficient work experience will earn you a lower 2 wheeler loan interest rate by increasing your credibility.
Credit Rating: Your credit rating is an important factor determining your bike loan interest rate. A decent credit score is paramount when applying for a bike loan. It indicates good intention when borrowing a loan, projecting you as a reliable borrower and fetching you a lower interest rate with the capacity of prompt repayment.
Age: Age is another crucial factor affecting your bike loan interest rate. For instance, an older applicant nearing retirement has less time to repay the loan, attracting a higher interest rate. As opposed to this, a young applicant in their prime earning years can repay the loan more conveniently, attracting a lower interest rate.
Location: Bike loan interest rates are deliberately affordable at reputable organisations like Hero FinCorp. However, the city you live in also plays a vital role in determining your interest rate. Customers in top-tier cities have higher living costs. Therefore, their 2 wheeler loan interest rate will be higher, too.
Tips to Lower Your Bike Loan Interest Rate
Although bike loan interest rates are affordable, you must take extra measures to reduce your interest rates further. Here are a few tips to reduce your bike loan interest rate:
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Maintain a Decent Credit Score: A decent credit score projects you as a good customer with sufficient repayment capacity. Therefore, maintaining a good credit score is extremely beneficial for attracting low interest rates with bike loans. Always pay your loan EMIs and credit card bills on time, diversify your credit portfolio with different types of credit products, reduce your credit utilisation ratio, and retain old accounts to improve your credit score and attract a lower interest rate.
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Show a High Repayment Capacity: A high income with low financial obligations ensures you can pay your loan EMIs conveniently without stretching your budget. It reduces your risk of loan default, making lenders confident in approving your loan with a lower interest rate.
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Reduce Your Debt-to-Income (DTI) Ratio: Your DTI ratio largely determines your repayment capacity. A higher DTI ratio means you have several other obligations to meet during the tenure, increasing your risk of default and attracting a higher interest rate. Therefore, pay off current obligations to reduce your DTI ratio and attract the best loan deal on a bike loan.
Now that you know the factors affecting your 2 wheeler loan interest rate, use the tips mentioned here to reduce your interest rates and get the best loan deal. You can apply for a bike loan at Hero FinCorp to finance up to 95% of your favourite bike/scooter cost. Here, you can get the best loan deals with affordable EMIs and repayment options.
Media info,
Contact Person: Hero FinCorp
Organization: Herofincorp
Email: [email protected]
Website: https://www.herofincorp.com/
Address: 09, Basant Lok, Vasant Vihar,New Delhi - 110057,
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