Getting a loan of any kind, including a two-wheeler loan, is a decision that needs careful consideration. This is because a loan that is poorly planned can lead to financial distress in the future and affect your chances of borrowing in the future too.
When you plan your two-wheeler loan according to your current and future financial needs, you minimise your chances of defaulting. Moreover, an optimised loan is a great way to ensure that your credit score stays intact.
However, planning your two wheeler loan does not simply mean choosing a lender that offers the most competitive bike loan interest rates. This is because there are factors that affect your borrowing costs and experience, which you need to consider before finalising the loan.
Read on to learn more about how you can choose the best two-wheeler loan.
Check the Eligibility Criteria
How well you meet the eligibility criteria of the lender plays a vital part in whether the process of availing of a two-wheeler loan will be seamless or challenging. Lenders have eligibility criteria to screen through applications and ensure that the loan is offered to creditworthy applicants.
As a result, if you meet the lender’s criteria, the chances of you availing of a loan quickly and easily are higher. Additionally, meeting the eligibility criteria also gives you a leg up in repayment terms.
If the lender finds you to be a low-risk borrower, you may get flexibility in your tenure and competitive bike loan interest rates. This would have a positive impact on your borrowing costs and experience.
You can check the lender’s eligibility criteria for a two-wheeler loan by visiting their website. Generally, these criteria include your monthly income, age, and residential area, among others. Once you are sure that you meet the eligibility terms, you can apply for the loan.
Assess the Loan-To-Value Ratio (LTV)
The LTV ratio refers to the loan amount you can get against the value of your two-wheeler. In simpler terms, the lender will only pay a certain amount for the bike you plan to purchase. The remaining amount will have to be paid by you.
Generally, lenders offer a two-wheeler loan for up to 95% of the bike’s value. This means that if your bike costs ₹2 Lakhs, the lender may offer a loan amount of up to ₹1.9 Lakhs. Here, you will have to pay the remaining amount.
Given this, choosing a lender that has a low LTV ratio would mean that your two-wheeler loan amount would be on the lower side. This could then result in you having to bear a higher amount as the down payment for your two-wheeler.
Keep in mind that the LTV offered to you is also dependent on your credit profile. So, make sure you have a healthy credit profile to secure a higher loan amount. You can check the LTV ratio of the lender on their respective website.
Look at the Bike Loan Interest Rates and Tenure Options
Your bike loan interest rates and tenure play a significant role in your repayment experience. Stringent terms could mean that your borrowing costs would be higher, and so will your monthly payments. This would ultimately strain your finances.
On the other hand, if the lender offers flexibility in the repayment terms, you can adjust them to ensure that you can comfortably repay the loan. A majority of lenders offer flexibility in repayment tenure only if the applicant is a low-risk borrower with excellent credit history.
So, make sure that you have healthy credit habits to build a good credit history and be eligible for flexible repayment terms for your two-wheeler loan. You can even check the repayment terms on the lender’s website to know if you are picking the right option for you.
Read through the terms to know other charges and fees
Reading through the terms and conditions of your two-wheeler loan, or any loan for that matter is a smart step that you should not skip. When you carefully read and understand the term, the possibility of you being blindsided by additional or hidden charges reduces.
Lenders levy additional charges in the form of the processing fee, prepayment and foreclosure charges and more. Knowing the terms and amount of this allows you to account for it in the total cost of borrowing. This way, you get a holistic idea of how the borrowing will cost, and if feasible, you can plan your two-wheeler loan accordingly.
Check your pre-approved offer
Lenders offer pre-approved offers to individuals who have excellent credit history and have a low risk of defaulting. To extend such an offer, they check your credit profile and give you a two-wheeler loan offer based on the assessment.
Since these offers are only available to individuals who have good credit standing, the repayment terms and the bike loan interest rates are quite favourable. As such, you can enjoy budget-friendly borrowing.
Additionally, pre-approved offers have a minimal processing time, giving you access to the funds instantaneously. You can check your pre-approved offer by visiting the lender’s website and filling out a form.
Understand the loan and repayment process
Knowing all you can about the loan and the repayment process is integral to your overall borrowing experience. While a majority of the lenders offer end-to-end digital applications for a two-wheeler loan, you should check the exact process to know what to expect.
By checking the loan application process, you can also understand which lender offers simpler, easier, and quicker loan approval. This way, you can choose the lender that offers you quick access to your funds and your bike.
Knowing the repayment process of your two-wheeler loan is also equally important because it affects how conveniently you can repay the loan. Many lenders offer online provisions to simplify the repayment experience. Some even offer a flexi-EMI facility, which allows you to reduce your monthly repayment amount.
Along with the above aspects, an important thing to look for is the digital provisions made available by lenders. While some lenders offer a 100% digital application, some take it a step further by allowing you to manage your loan online.
This gives you instant access to your loan amount, outstanding and paid, which allows you to keep track and ensure that repayment is done on time. Some lenders even give you flexibility in your repayment terms which makes the whole process convenient and hassle-free.
Lastly, don’t rush while deciding on which two-wheeler loan to choose. Being patient and thorough in your assessment of the loan offer will allow you to enjoy your experience, while also ensuring that repayment gets handled easily.
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