India’s two-wheeler loan market is growing at a steady pace. This growth reflects a consumer preference for two-wheeler financing, largely due to their lower interest rates compared to personal loans.
While many banks and Non-banking Financial Companies (NBFCs) in India offer two-wheeler loans, the terms and deals can differ significantly. Interest rates and offers are not uniform across lenders, so it’s important to do thorough research before selecting one.
Key Elements to Review Before Choosing a Lender
The following is the shortlist of some of the most relevant factors to help you compare the loans available from different creditors:
Check Eligibility Requirements
Each financial institution sets its own eligibility criteria. Before choosing a lender for two-wheeler finance, ensure that you meet their requirements. Select one that matches your profile to improve your chances of securing a better deal. The usual criteria are:
- Nationality: Must be an Indian citizen
- Age range: 18–70 years (It can be different for salaried, self-employed, and co-applicants)
- Customer profile: Salaried, self-employed, pensioners, students, homemakers, or farmers
- Credit Score
A strong credit score unlocks better offers, while a lower score limits your options. Credit scores indicate risk levels and influence approval speed, loan amount, and interest rate:
| Credit Score Range | Impact on Loan |
| 750 and above | Fast approval along with the best offers from the lender |
| 650 – 749 | Good approval chances, and it will come with standard benefits but with some limitations |
| Below 650 | It will be hard to get approval; you may have to agree to higher bike loan interest rates |
Evaluate the Loan Amount Offered
The loan amount is a key factor when choosing a lender. When planning to purchase a costly bike, you need to ensure the lender offers a high loan amount with a good Loan-to-Value (LTV) ratio. Several factors affect this amount, including:
- Credit score
- Income
- Debt-to-income ratio
- Loan tenure
- Down payment
- The type and brand of the two-wheeler
Many banks and NBFCs provide 100% financing on two-wheelers, depending on your loan eligibility. In contrast, most lenders typically require 10–20% of the vehicle’s cost upfront. You need to choose a lender who offers complete financing carefully, ensuring there are no hidden charges involved.
Understand EMI Terms
The EMI depends largely on the loan tenure. Select an EMI that fits your budget. Use a two-wheeler finance calculator, an online tool that helps you estimate your EMI. These calculators are usually free, and most lenders provide them. You can access one from the lender’s official webpage.
To calculate it using the calculator, you need to enter:
- Loan amount
- Interest rate
- Tenure
You can also manually calculate it by using the following formula:
EMI = P * R * (1 + R)^N / [(1 + R)^N – 1]
Here,
- P is the loan principal
- R is the monthly bike loan interest rate
- N is the loan tenure in months
Review Additional Charges
As a borrower, you pay not only the interest rate but also additional charges on your bike loans. Some of these may be hidden in the loan agreement. To avoid hidden charges on a loan:
- Thoroughly read the loan agreement
- Compare offers from multiple lenders
- Ask for clarification on any fees or terms you do not understand
Some of these common charges include:
- Processing fees
- Prepayment penalties
- Late payment fees
Opt for reputed lenders. They maintain transparency and charge only what they state in the terms and conditions.
Look into Repayment Flexibility
Another key factor to consider when choosing a two-wheeler loan is the loan tenure. Most Indian lenders offer terms ranging from 12 to 60 months. This range provides enough flexibility in managing your finances.
Note that longer tenures often carry higher interest rates, as they increase the lender’s risk. Opting for a shorter tenure is usually a better choice. However, ensure the EMI amount comfortably fits within your budget and does not lead to debt.
Assess the Loan Application Process
The lender needs to provide different options to apply for the loan to ensure convenience. There has to be both an online and offline application process to cater to all kinds of applicants. The process also needs to remain straightforward. It mainly involves the following steps:
- Filling out the application form
- Submitting or attaching the documents
- Complete the process
A representative may contact you to request additional documents during the evaluation.
Explore Available Offers or Discounts
Financial institutions often extend special offers to both new and existing customers. During festive seasons, you may receive attractive deals on two-wheeler loans. Before applying, compare offers from multiple lenders to select the most beneficial option.
Consider Customer Support Quality
Many borrowers overlook customer service when selecting a lender, but it becomes crucial after loan approval. Ensure the lender provides reliable support, as you are likely to require assistance during the repayment period. With a suitable lender, your loan repayment journey remains smooth and stress-free.
Conduct thorough research on the lender by considering these key factors. Focus on repayment tenure and EMI amount when shortlisting options. Additionally, check for any seasonal discounts to reduce overall costs.
Anantha Nageswaran is the chief editor and writer at TheBusinessBlaze.com. He specialises in business, finance, insurance, loan investment topics. With a strong background in business-finance and a passion for demystifying complex concepts, Anantha brings a unique perspective to his writing.
