Considering rising fuel costs and daily traffic jams, two-wheelers, especially bikes, are the best and most cost-effective mode of conveyance. However, due to the BS-VI norms and the rise in commodity costs, bike prices have witnessed an almost 20% hike in the last two years.
So, if you are planning to buy a bike, availing a bike loan can be an ideal financing option. With a bike loan, you can prevent yourself from compromising on the liquidity you need and denting your immediate savings.
However, your decision to choose a particular loan offer must be backed by sound research. With a higher bike loan interest rate, you eventually end up paying much more in the form of interest.
In contrast, an affordable bike loan interest rate makes repayment more pocket friendly. So, read on to know more about how you can get the best bike loan interest rate to save more on your interest payments.
Maintain a Spotless Credit History
In order to enjoy the most competitive bike loan interest rate, you need to have an impeccable credit score. Before approving your loan, banks and NBFCs check your credit score and determine the bike loan interest rate based on that.
Lending institutions consider those who have higher credit scores as reliable borrowers. So, if your credit score is high, you can get a bike loan at lower rates. On the other hand, the bike loan interest rate will be higher if your credit score is less than ideal.
Lenders consider a CIBIL score of 750 and up a good score. So, try to get your score to this figure. In order to improve and maintain a good credit score, follow these practises:
- Clear your credit card bills in full by the due date
- Repay the monthly instalments of your existing loan/s on time
- Keep your credit utilisation ratio and debt-to-income ratio low
- Try to experience different types of credit
Compare Lenders and Interest Rates
Bike loan interest rates vary depending on the lender you choose. So, before making a decision on which loan offer to avail of, compare different lenders and their offers. You can compare financial institutions based on the following parameters:
- Bike loan interest rate
- Processing fees
- Pre-payment and foreclosure charges
To determine your monthly outflow towards the loan repayment and zero in on the best lender, you can use the bike loan EMI calculator.
It will help you compute the amount that you will have to pay each month to repay your loan. This is based on your loan amount, tenure and interest rate, and all you need to do is enter these amounts. This way, you can choose a loan offer that is most affordable.
Look for Loan Tie-ups At the Dealership
When you are finalising which two-wheeler loan to get, you generally have two options to choose from. You can either select a lender yourself or you can check if the dealership you are purchasing your bike from has any tie-ups with lenders.
Many two-wheeler dealers partner with banks and NBFCs to provide financing solutions to customers. There is a high chance that you may get competitive bike loan interest rates with such an option.
Apart from offering nominal bike loan interest rates, lenders associated with the dealers may also waive off processing fees and disburse funds quicker. These are all the benefits you may enjoy by going this route. However, make sure you don’t go with such an offer blindly.
Always compare different lenders’ rates using a bike loan EMI calculator to determine the best way forward.
Check for Special and Pre-approved Two-wheeler Loan Offers
During special occasions like festivals, holidays or sale seasons, lenders may come up with special bike loan offers. These may also include a more affordable bike loan interest rate or even zero processing fees. Leverage these offers when you can to enjoy easy repayment.
Apart from this, you can get pre-approved two-wheeler loans if you have a spotless repayment record and a healthy financial relationship with your bank.
A pre-approved loan is one that your lender tailors for you and generally comes with a more competitive bike loan interest rate. With a pre-approved offer, you can also enjoy faster processing and disbursal.
Make a Higher Down payment
A down payment refers to the amount that you contribute yourself to purchase the bike. This is the amount that you do not get financing for. With a higher down payment towards your loan, your loan amount is reduced.
Most lending institutions charge lower interest rates if the loan amount is lower. This is because lenders associate a smaller loan amount with a lower risk.
Also, with a higher down payment, your total interest dues are lower since the principal you borrow is also lower. Keep this in mind, so you can pay more towards the down payment if you have the available funds.
Select an Appropriate Repayment Tenure
One of the factors that influence your bike loan interest rate is the length of your repayment tenure. Lenders usually offer a lower interest rate when you have a shorter repayment duration as it lowers their risk.
However, also remember that when you opt for a shorter tenure, the EMI that you will pay toward your loan will be higher. However, the total interest that you will pay on loan will be lower.
So, when choosing a bike loan, it is important to select the right repayment tenure based on your financial capabilities. Again, this is something you can figure out when you use the bike loan EMI calculator before availing of the loan.
Check Offers from NBFCs
Sometimes, you can get a more affordable bike loan interest rate with non-banking financial companies. This is because NBFCs have simpler eligibility criteria, that you may find easier to meet as compared to banks.
When you fulfil all eligibility terms, you can get the best interest rates from lenders. So, if you are unable to meet the qualifying criteria with banks, check those of NBFCs to get access to lower rates.
Now that you know how to get the lowest bike loan interest rate, get started and work on the tips above. Don’t miss out on the critical step of using a bike loan EMI calculator to compare different loans, their rates and eligibility terms.
Once you have this information, you can make informed choices and buy the bike you want.