One of the reasons as to why Indian roads feature countless two wheelers is due to the easy availability of financing in form of loans. Courtesy of attractive two wheeler loan interest rate that lenders levy, people find this financial product feasible in every way. Not only is it easy to avail of owing to less stringent two wheeler loan eligibility criteria, but also convenient to repay.
Since much of the convenience pertaining to two wheeler loans depends on the interest rate, you must conduct research on this aspect. Lenders charge an interest rate for every loan that they disburse and the amount calculated can make a big difference to your monthly instalments. In such a situation, the onus is on you to learn about the various factors that impact the two wheeler loan interest rate and figure out how to lower the percentage.
While some of these factors might vary from one lender to another, others remain uniform across the niche. To this effect, compiled as follows is a comprehensive of all possible factors that can impact the rate of interest pertaining to a two wheeler loan –
Your credit score – CIBIL assigns a credit score to each individual based on financial behaviour and past transactions, and this is known as credit score. If you have repaid past loans as per schedule, and have cleared your bills and debts on time, CIBIL would accord a high score. This in turn would reflect well on your financial reputation, causing lenders to levy a lower rate of interest on your loan.
However, the vice versa is also just as true, which is why this factor is regarded as being crucial while checking two wheeler loan eligibility.
Ability to make down payment – The amount of money that you can pay upfront at the time of booking the two wheeler is referred to as down payment. Being over and above the loan amount, down payment represents a fraction of the total purchase value, and is deducted from the buying price. Therefore paying a substantial part of the purchase price as down payment implies seeking a smaller amount as two wheeler loan. Doing so convinces lenders of your strong financial standing, thus enabling them to lower the interest rate on your loan.
Source of income – Not only does this factor influence the two wheeler loan interest rate, but is also included in the two wheeler loan eligibility criteria. By ascertaining the income source, lenders gauge your ability to pay back the amount within the stipulated time frame. So, if you work in a government office, lenders would levy a lower rate of interest owing to job stability and long-term employment. Likewise, working in a private outfit would attract a comparatively higher interest rate, while self-employed individuals can expect the highest percentage.
Place of residence – Strange though it might seem, where you live can impact the two wheeler loan interest rate. Residing in a metropolitan city is equated with higher earnings, and hence increased probability of paying timely monthly instalments. Therefore, living in a bigger city attracts a relatively lower rate of interest than a tier II city or a small town.
Age factor – Ideally buyers who are older than 18 years and younger than 65 years attract low two wheeler loan interest rate owing to being eligible for employment. Anyone below 18 years of age is likely to be dependent on an adult for repaying the loan, while someone close to retirement age may not have a steady source of income. In both scenarios, chances of defaulting on the monthly instalments are high, and hence lenders levy a higher rate of interest.
Level of income – Your income level is inversely proportional to interest rate, wherein lenders find higher income levels to be sufficiently convincing to offer a reduced rate of interest. A hefty income package indicates enhanced capability of timely disbursement of instalments every month, and lesser chances of a default.
Final thoughts
Brand and model of the bike also play an instrumental role in determining the two wheeler loan interest rate. Choosing an older model of a well-known brand attracts a lower interest rate, given the high resale value of the vehicle. But if you settle for a not-so-popular brand, it might take much longer to convince the lender to cut down the interest rate on the loan. Two wheeler loan eligibility also requires the buyer to complete repayment of past debts before availing of a fresh loan to improve possibility of approval and favourable terms.
So, if you have been eyeing a two wheeler for some time to be able to negotiate through the traffic, checking the two wheeler loan eligibility would be an appropriate first step. Going ahead, make sure to pay all the bills and pending payments so as to earn a high credit score. Before applying, negotiate with the lender to the best of your ability, and you might end up with an attractive two wheeler loan interest rate and save on finances.