The purchase of a two wheeler is a significant expense for all, particularly in nations where two wheeler commute is the way of life. Two wheelers in India are not merely transportation but luxury and freedom. Due to increasing demands of motorbikes and scooters, institutions and banks provide two wheeler loans so that people can make their dream of buying a vehicle come true. Two wheeler interest rate is the strongest component of the loan, and one of the primary driving forces of the cost of borrowing.
In this article here, we are going to learn about what is a two wheeler loan, interest rates, and all the factors that determine the rate you will receive so that you will be ready in advance before taking a loan for your next two wheeler.
What is a two wheeler Loan?
A two wheeler loan is a financial product, a product of non-banking finance companies (NBFCs) and other finance companies that lend money to a person in order to buy motorbikes, scooters, or other two wheelers. The loans finance most of the cost of the two wheeler, and the borrower repays the loan amount in equated monthly installments (EMIs) within a predetermined time frame.
Two wheeler loans are very convenient because they allow customers to pay for the cost of the vehicle in installments, instead of paying in full. This makes purchasing the vehicle easy and is convenient particularly for a person who may not have the entire money at hand at one time. Two wheeler loan also have easy repayment schedules, less paperwork, and quick processing, and therefore they are an easy option for everyone.
How do two wheeler interest rates function?
Two wheeler rate of interest is the rate of interest your bank will charge on you if you are qualified to borrow money. Two wheeler rate of interest is what you need to pay as extra amount within the timeframe and the original amount of the initial amount. Two wheeler rate of interest in real life is the price you need to pay for lending money.
two wheeler interest rates differ considerably in different financiers and are determined by an infinitely large number of parameters. Two wheeler loan interest is relatively lower compared to other loans, i.e., personal loan or credit card funds, and hence it emerges as an affordable choice for customers.
Factors That Determine two wheeler Interest Rates
There are a number of reasons which are remembered while choosing an interest rate on your two wheeler loan. They are:
1. Loan Tenure
The period for which you are providing the money can also be a decisive factor in setting the interest rate. The short-term advances are provided at lower rates of interest since the repayment is premature and the risk to the lender is low. The long advances may be higher in interest because the lender is taking more risk for the longer duration.
2. Your Credit Score
Your credit score is also one of the biggest determiners of two wheeler loan rate of interest. Your credit score determines your credibility. The more your credit score, the more unlikely you would be a risk as a borrower, and hence the more likely that you would receive money at a lower interest rate. Therefore, in case you have a bad credit rating, your lender will charge more interest since they believe lending you money is risky.
3. Down Payment
Down payment is how much you put down to purchase the two wheeler. In general, the larger your down payment, the smaller your two wheeler interest rate will be. The greater you pay down, the smaller the loan you have financed, and the less risk the lender takes, and potentially it allows you to qualify for a lower interest rate.
4. Income and Stability of Employment
The lenders also look at your income and employment history when deciding on the rate of interest. When you are regularly employed and have a good employment history, you are a good borrower, and you will be quoted a low rate of interest. When you are self-employed or have an irregular income, the lender will quote a higher rate of interest as a risk compensation.
5. Loan Amount
The size of the cash you are borrowing may also be one of the things used to define the interest rate. The organization lending will charge low when the sizes for borrowing are big because the big size lowers the cost of administration and time consumed in processing separate loans. In theory, small loans can have slightly higher rates because the borrower is giving a lower value with proportionally higher fees for administration.
How to Obtain the Best Two-Wheeler Loan Interest Rate?
You need to obtain the best interest rate on a two wheeler so that you don’t pay the cost of the loan. These are some tips which will help you to obtain the best interest rate:
Keep a Good Credit Rating: Keeping a good credit rating is probably the easiest way to get a lower rate. Pay bills promptly when they fall due, keep low amounts of debt, and make sure there is no error in your credit history.
Compare Rates of Multiple Lenders: Various lenders provide varying interest rates and terms. Shopping around with an aim to get the lowest rate is what one should do.
Don’t Forget Your Loan Tenure: Longer tenures result in lower EMI sizes, but may end up making the loan costlier due to more interest paid over a longer duration. Opt for a tenure that offers lower monthly payment with less interest.
Make a Bigger Down Payment: Do whatever you can to make a bigger down payment since it will reduce the amount you will borrow and enable you to use a lesser interest.
Conclusion
A two wheeler loan is a great choice to finance your next motorbike or scooter acquisition, as long as you have plans to pay for it installment-wise in the future.
But you should keep facts regarding the effect on the two wheeler rate of interest so that you can have the best economically laden loan choice that is appropriate based on your budget. If you have a good credit record, have an understanding of comparison of interest rates, and have your loan period in mind, you can get a need-based loan which provides you with a lower rate of interest. Two wheeler ownership is a choice that can change your life by giving you greater mobility, convenience and independence. With the correct two wheeler loan and equitable rate of interest, you are able to realize this dream without breaking you financially.
