Tips to Get Best Interest Rates on Two Wheeler Loan

According to the Ministry of Road Transport and Highways (MoRTH), the total number of registered two-wheelers in the country stands at just over 21 crores. This is a marked increase from the 11.5 crore registered two-wheelers in 2012. Thus, in just a decade, the number of registered two-wheelers in India has nearly doubled, highlighting the growing demand for cost-effective two-wheelers. One of the primary factors driving this growth is the ease with which individuals can apply for - and obtain two-wheeler loans today. Unlike yesteryear, people don't have to jump through hoops just to apply for a two-wheeler loan.

In 2020, the two-wheeler loan market in the country was pegged at $ 7.2 billion, and it is expected to reach $ 12.3 billion by 2025 - a compound annual growth rate (CAGR) of just over 11%. Banks and NBFCs have also significantly loosened lending standards to encourage individuals to apply for two-wheeler loans. Concomitantly, automotive brands have diversified their portfolio, offering a range of commuter, naked, sports, cruiser, touring and dual-purpose motorcycles, along with scooters.

This conspicuous growth of the two-wheeler loan market has been accompanied by a perceptible increase in interest rates. According to industry estimates, the interest rate on two-wheeler finance was around 10% in 2012, compared to the current interest rates. However, the interest rates can range anywhere between 6.85% and 28.30% per annum, and the rate levied by the lender depends on several factors. While applying for a two wheeler loan, the interest rate levied by the lender can either make the purchase affordable, or burden you with a substantial loan amount to be repaid.

There are several things you can do to ensure that you avail of the lowest interest rates. We provide you with a few tips and tricks to get the best interest rates while applying for a bike loan.

Check and Maintain Your Credit Score

One of the cardinal rules to follow while applying for any loan - installment loan or revolving credit (credit cards, for instance), is to maintain a healthy credit score during the application process. For most lenders, clean credit history and a good-to-excellent credit score are prerequisites, and while not having a good credit score isn't a deal breaker, it certainly attracts higher interest. If you currently have a bad credit score, the lender may have concerns about your creditworthiness, and can charge added interest as a risk premium. To avoid this situation, you should maintain a credit score of at least 750.

Compare Interest Rates

Before applying for a bike loan or a two-wheeler loan, it is prudent to check and compare the interest rates being offered by different lenders. Certain banks and NBFCs may offer lower interest rates than others, and you should also check for additional charges. These include processing fees, penalties, pre-payment charges and pre-closure charges.

Check for Collaboration or Tie-ups

One of the more crucial aspects often overlooked by prospective borrowers is the possible collaboration or tie-up between the two-wheeler brand and a lender. If you're interested in purchasing a particular model, check if the brand currently has a tie-up with a bank or an NBFC. In certain cases, the lender can decide to waive off the processing fees or levy lower interest if you are purchasing a two-wheeler from a brand with whom they have a working relationship. Once you are aware of the interest rate, you can compare it with the interest rates being offered by other lenders.

Pre-approved Two-wheeler Loan Offers

If you have been a loyal customer and have a good relationship with your bank, you may be pre-approved for a two-wheeler loan. Banks tend to offer lower interest rates to their loyal customers, while such loans are processed quickly. You can check the terms of your pre-approved offer, and use a bike EMI calculator to get an idea of the EMIs you have to pay every month.

Apply for a Loan During the Festive Season

During festive seasons, banks and NBFCs tend to come up with seasonal offers, which can include lower interest rates on two-wheeler loans. You should be vigilant and keep an eye out for such offers. Additionally, lenders can also extend special offers on the eve of Republic Day, New Year and Independence Day.

By following these tips, you can avail of the best interest rates in the market. You can visit the aggregator platform or any other bike EMI calculator available online and calculate your loan EMI. You should also ensure that the EMI amount doesn't eat into your monthly budget, which can be achieved by opting for longer repayment periods. Bajaj Finserv, for instance, offers two-wheeler loans with repayment tenors ranging from 12 months to 60 months.