The availability of bike loans has reduced the cost and increased the convenience of bike ownership. You have the convenience and freedom to pay the bike’s purchase price in manageable installments with a bike loan at an appropriate interest rate.
The benefits of your loan will not be maximized if you select one with high-interest rates. Therefore, before applying for a bike loan, it is crucial to understand the variables that determine the bike loan interest rate.
Factors that Affect the Bike Loan Interest Rate
Do you know that loans account for over 75% of bike purchases in India? Easy access to financing, attractive interest rates, simple repayment alternatives, and rising aspirations among individuals have all led to a growth in the percentage of bike loans.
But have you ever wondered why the interest rates on bike loans differ for each borrower? And why do lenders occasionally turn down requests for bike loans even though they are secured loans?
Many find the question intriguing. Therefore, we will talk about the bike loan interest rate factors
A high credit score is necessary for any bike loan application to be approved. Lenders can better evaluate a borrower’s creditworthiness and capacity to repay a loan on time by analysing their credit score.
One of the crucial requirements for a bike loan application to be authorised is having a credit score of at least 650. Your chances of obtaining a bike on installment increase with your credit score.
Before approving your application for a bike loan, lenders typically check your income to assess your ability to repay the loan. To be considered for a bike loan, most lenders demand that borrowers have a minimum monthly salary of INR 20,000–INR 25,000 (depending on locality).
You should have a consistent income stream in order to qualify for a bike loan with a lower interest rate. Your chances of obtaining a cheap bike loan interest rate increase with your income level.
The advance sum paid to secure the purchase of a bike or other expensive item is referred to as a down payment. You’ll have to pay this out of your own money. For instance, making 20% of the bike cost as a down payment.
The amount of the down payment is a key factor in deciding the interest rate when taking out a bike loan. The interest rate charged by the lender will be lower the more money that is put down.
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Model of the bike
The type, model, and manufacturer of the bike all have a significant role in determining the interest rate for that vehicle. Lenders prefer to finance models of bikes with high resale value.
Lenders may deny your request for a bike loan if your existing EMIs are greater than 60% of your monthly wage. Therefore, before applying for a loan, make sure that your current EMIs are as low as possible. Your capacity to negotiate for a lower interest rate increases as it decreases. This is particularly true if your bike loan’s ensuing EMI will only represent a modest portion of your monthly income.
Your residence will be a factor in calculating your debt-to-income ratio. As a result, it has a big impact on the two-wheel bike loan interest rate.
For example, a person living in a metropolitan area has to earn more than someone living in a city with two tiers. As a result, your style of living has a direct impact on the interest rates you pay.
The buyer’s age has a considerable impact on the rates. A person who is almost at retirement age might not have the financial resources to repay an unpaid loan with a high interest rate. In such circumstances, your loan can cost you more, which would raise the interest rates on your motorcycle loan.
Criteria for Bike Loan Eligibility
Some of the requirements for bike on installment eligibility include the following:
- Must be at least 18 years old when applying for the loan and not older than 65 when it matures.
- Must be a resident of India who has lived at the same residence for at least the past 12 months.
- Must be a salaried worker with a minimum of one year’s work experience. Professionals who work for themselves must present their ITR from the prior year.
- Should possess a high CIBIL rating
- Should be eligible for Fullerton India’s minimal income level at the time of application.
Before moving forward with your bike loan, it’s important to take into account the factors that influence the bike loan interest rate on your 2-wheeler loan. The procedure will become simpler and take less time if the proper financial service is chosen, nevertheless.
Some of the top bike loan lenders offer bike loan on installment with reasonable interest rates that can help you save money. Apart from the interest rates being reasonable, the payback period and other basic terms and conditions are also flexible.