Two-wheelers are one of the most common modes of transportation in India, and a two-wheeler loan helps many to own their dream two-wheeler. Instead of paying the entire amount of a purchase, you can keep your funds safe for emergencies and let a lender pay for your dream of owning your desired two-wheeler. If you are wondering about the two-wheeler/bike loan interest rate, you should know various factors to look at while choosing a loan based on interest rates.
Let us check out these factors affecting your two-wheeler loan interest rate.
5 Key Factors that lenders consider when deciding the interest rate on your bike loan
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Loan Amount
The loan amount is the most crucial aspect considered to determine the loan interest rate. Lenders charge a higher interest rate on a high loan amount. If you are looking for a low-interest rate, you can increase the down payment or decrease the loan amount.
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Loan Tenure
Generally, loan seekers consider a longer tenure to lower the bike loan interest rate and reduce the EMIs. It can help you to reduce the interest rate, but you may end up paying more if the loan tenure is too long. You should choose an appropriate loan tenure to ensure the best two-wheeler loan interest rate.
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Type of Two Wheeler You Choose
The loan interest rate varies according to the category and the model of the two wheeler loan you want to buy. Generally, lenders charge higher interest rates on luxurious or higher-end bikes because of the high loan amount.
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Income
Lenders consider your income to identify if you are capable of repaying the entire loan amount within the stipulated time. If the lender is convinced with your income level, he can offer you a two-wheeler loan at a better interest rate.
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Credit History
While some lenders, such as Muthoot Capital, don’t look at credit history as a factor in deciding the interest rate, some of them pay attention to it. The loan applicant’s credit history should be impeccable to enjoy bike loans at the best interest rate. If you have paid for all your financial obligations in a timely manner, you can expect a reasonably low interest on your loan.
Must Read: Which Bank is Best for a Second-hand Car Loan?
Other Crucial Factors
As a borrower, you should know about other factors also that can impact your two-wheeler loan, depending on your choice of lender.
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City Tier
The city where a loan applicant resides is one of the factors that impact the bike loan interest rate. Loans for metropolitan cities are costlier than in other cities. The simple reason is the difference in the living standards and thus, the income.
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Nature of Employment
Lenders look at your employment nature. Generally, if it is a secured job like in any government department, they can offer you a lower interest rate. On the contrary, if you are self-employed, your financial documents will be scrutinized thoroughly before offering a loan interest rate. If your job is risky that can affect your health, the lender may charge a higher interest rate.
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Age of the Applicant
Lenders need to ensure the timely repayment of loans. Therefore, they look at the borrower’s age while offering interest rates on loans. Individuals at a young age can get a loan at a lower interest rate than an individual near retirement age.
Thus, considering these factors, you can opt for the best two-wheeler loan at the best interest rate.
