What is a Two-Wheeler Loan (Bike Loan)?

When you don’t have the funds to buy a bike, a two-wheeler loan can help. Bike loans allow you to buy your favorite bike and pay back the loan with equated monthly installments. As a result, you won’t have to sacrifice any of your savings.

Motorbikes are very popular among people living in metropolis cities, as traffic jams are very common in those areas. Since motorcycles are preferred by the vast majority of the population over automobiles, the popularity of bike loan has grown, as well. Hence, people prefer to travel by bike to their destination rather than driving a car where frequent traffic jams occur.

A two-wheeler loan is a good option if you do not have the cash to purchase a bike outright. A loan is a valuable tool, regardless of whether you are buying a new two-wheeler or a used one. A bike loan is a way of borrowing money from a lender and using it to buy a two-wheel vehicle. Upon receiving the funds, you need to pay them back over a given period of time along with any fees or interest that may be applicable.

Thus, two-wheeler loans are essentially a form of financing being offered to borrowers by some banks or non-banking financial companies where they are able to purchase a two-wheeler. Two-wheeler loans have become increasingly popular over the past few years. In response to the rapidly growing popularity of two-wheeler loans, a number of banks and non-bank financial institutions are now offering two-wheeler loans to people with good credit histories.

Applying for a Two-Wheeler Loan: Things to Remember

Now that you are aware of how to apply for a bike loan, you are ready to take action. It’s time for us to get started by taking a look at some of the top tips that you need to keep in mind when you apply for a two-wheeler loan. These factors will help you choose the right loan for your needs, and this will help you avoid paying more than you’re supposed to.

Explore Thoroughly:

It is crucial that you do this before applying for a loan for a two-wheeler. You should make sure that you carry out thorough research before applying for a two-wheeler loan. Find out all the various options available to you from different lenders. Make sure you compare interest rates, fees, terms, and other aspects of the loans so that you can make the best decision. Taking such actions will allow you to find the most efficient and cheapest loan option. In this way, you will be able to find the most beneficial and cost-effective option.

Consider Loan repayment tenure carefully:

You will have to pay back a certain amount each month depending on how long your loan is for. You need to ensure that your monthly repayments are within your reach. If you choose a shorter tenure, you will be able to pay off the loan in less time. However, you will be paying a higher EMI due to the short tenure of the loan repayment You should therefore pick your loan amount based on the amount you can afford to pay back every month without experiencing any financial difficulties.

Pick a reasonable interest rate:

A loan’s total cost is determined by the interest rate you pay on your loan. The interest rate is also a major factor in determining the amount of your EMI. A low-interest rate can help you keep your monthly EMI payments low if you select a loan with a low-interest rate. Your loan will also be cheaper if you choose one with a low rate of interest.

Interest rate comparison – floating vs. fixed:

It’s possible that some lenders will offer you both a floating interest rate as well as a fixed interest rate. As the market rates fluctuate, the floating interest rates will change accordingly. On the other hand, fixed rates remain constant regardless of fluctuations in the market. It is important to remember, however, that floating interest rates tend to be lower than fixed interest rates. Thus, you will need to do thorough research on the types of interest rates beforehand so that you can make a wise decision. Due to the fact that as we have discussed already the interest rate plays a significant role in increasing the overall cost of a loan.

Calculate your EMIs before applying:

You should consider comparing your loan options along with the respective EMIs when comparing the different loan options. Ensure that you choose a loan that offers you an affordable EMI along with convenient repayment terms.

Check on prepayment fees:

You should find out the charges that will apply to prepayment or foreclosure if you intend to do so at any point in time. There are lenders who will charge you a fee for this while there are others who will not. Paying off your loan early can save you a lot of money in interest payments.

Make sure you read the terms and conditions carefully:

As well as being called fine print, it can also be called the terms and conditions. You ought to make sure that you read your loan offer document carefully and ensure that you understand all the terms and conditions before signing it. If you read the fine print thoroughly, you can find that there are many hidden charges and fees that may otherwise go unnoticed by you. You should therefore make sure you read the fine print to avoid accidentally being penalized in the future.

Frequently Asked Questions (FAQ’s) – Bike Loan

Yes, used bikes can be financed with a bike loan. You can only get a used bike loan if you are more than 21 years of age. Furthermore, at the time of the two-wheeler loan maturity, you cannot exceed 59 years of age. Both salaried as well as self-employed individuals can apply for a second-hand bike loan.
Primarily, there are two types of bike loan –1. Secured Loan: This is a type of loan that you get against the security of a collateral. It can be a piece of your land, home, or valuables like gold. Most lenders secure the two-wheeler loan against the bike. This means that the bike itself becomes the collateral. If you cannot repay your loan, the lender has a legal right to seize your bike. If you do not want the bike as collateral, put up some other asset instead.2. Unsecured Loan: If you can take a guess, this type of loan is the opposite of secured loans. These loans are not secured against any asset or collateral. These are basically like personal loans that you can use to buy a bike.
Depending on the bank, the maximum amount of the loan may vary. Banks typically approve loans ranging from 80% to 90% of the vehicle's on-road price. Only a few banks loan 100% of the Bike's ex-showroom price. Additional criteria that determine the amount of financing offered include price, type of Bike (standard/premium), and whether you are applying for a new or used Bike.
Similar to any other loan application, you must submit supporting documents such as proof of income (last three pay slips/latest acknowledged ITR), address, and identity proof along with your PAN card. Apart from this, if there are any other documentation requirements, those tend to differ from lender to lender.
Bike Loans have a duration of one year to five years. EMI payments for shorter loans are higher than those for longer ones, and vice versa. A few lenders are currently providing Bike Loans with longer terms of up to 7 years.
The majority of lenders do not specify a minimum salary requirement for their loans, but your application may be denied if your salary does not exceed a predetermined threshold as determined by the bank for internal purposes. To increase the chances of getting a Bike Loan approved, you might consider applying with a co-borrower.
You may need a co-borrower or a loan guarantor if you do not meet the loan eligibility criteria such as income, age, and credit score. Providing that you meet all these minimum lending requirements, you can apply for a Bike Loan on your own.
Your loan application may be rejected if you have a bad credit score, have defaulted on your repayments, have applied for and been rejected for loans multiple times, etc. In addition to meeting these criteria, you should also meet the bank's eligibility requirements, such as minimum income, age, previous relationships, etc.
Not at all. A Bike Loan does not qualify for tax savings in any way, unlike a home loan. As a result, Bike Loan amounts should always be determined by your actual loan needs, as taking a huge loan amount to purchase a fancy Bike is not advisable.
Generally, a fixed rate Bike Loan means that the rate of interest stays the same over the period of time. Thus, the EMI payment requirement for fixed-rate Bike Loan does not fluctuate with market conditions. On the other hand, floating rate loans have a periodically varying interest rate based on the lending institution's decision.
Your credit history and prior relationship with the prospective lender will help you negotiate the interest rate for your Bike Loan. Paying your regular EMIs for previous loans or credit cards can help you qualify for a Bike Loan with a lower interest rate.
According to the RBI directive, from April 2016, banks have been using MCLRs (marginal cost of lending rates) to determine interest rates on a variety of loans including auto loans. Banks are currently using MCLR-based rates for Bike Loans, which are slightly lower than the base rate method they used previously. Further, financial institutions will have to adjust their rate of interest on loans every six months or once a year under the new regulations.
When you purchase a vehicle, you must pay insurance and registration fees. A Bike Loan won't cover those costs. A mandatory Bike insurance policy must be purchased separately and all registration-related costs must be borne by you alone, as they are not included in your Bike Loan. However, some banks offer special schemes to cover these costs.
Most lenders will let you pay back your Bike Loan early, but there may be a few conditions. Usually, Bike Loan providers allow repayment only after you have completed the specified loan tenure. There is also a prepayment penalty. These penalties typically range from 1% to 4% of the loan amount. Before you make a prepayment, you should confirm with your bank all charges that apply.
Definitely not. Individuals who get Bike Loans are only allowed to sell their Bikes to new owners when their loans are fully paid off. In other words, before you can sell your Bike, you need a NOC from the bank, which will only be released when your Bike Loan is paid in full.
Loans can be repaid by means of post-dated checks (PDCs) that you provide to your lender when applying for a loan. An auto debit facility is another option, where the EMI is automatically debited from your savings account after you provide an ECS (Electronic Clearing Service) mandate to the lender.
Banks consider you a defaulter if you do not pay two or more EMIs on time. In the beginning, you will be charged a penalty fee and asked to regularize your payments. Financial institutions can legally repossess your vehicle if you do not regularize your payments after repeated notifications. This will negatively impact your credit score, and you may find it difficult to obtain a loan in the future.
When you pay off your loan in full, the bank issues Form 35 and an NOC (No Objection Certificate) to the RTO (Road Transport Office). The lender's name will then be removed from the RC book endorsement.
It is not necessary to have an account with the bank which you approach for a Bike Loan. It is definitely in your best interest to take out a loan from the bank offering you the lowest interest rates. However, taking a loan from a lender or bank you have dealt with previously may improve your chances of getting hassle-free approval, faster processing, waiver of processing fees, etc.
A few automobile manufacturers offer zero percent financing in collaboration with lenders. In this plan, the automobile manufacturer is responsible for repaying the interest on the loan to the financier, not the borrower.
Almost all traditional banks offer Bike Loans including State Bank, Axis Bank, Union Bank, HDFC Bank, ICICI Bank, Kotak Bank, etc. It is easy to get a Bike Loan through these financial institutions and many others as well.
In fact, yes. There are several NBFCs (non-banking financial companies) that offer Bike Loans to individuals. Among the top NBFCs providing Bike Loans for prospective buyers are Mahindra Finance, L&T, AU Financiers, Bajaj Allianz, Sundaram Finance, and Reliance Consumer Finance. Many NBFCs offer Bike Loans that are as competitive as those offered by traditional banks.
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