Owning a two-wheeler in India enables you to enjoy convenience, affordability, and freedom. However, financing a two-wheeler through a loan requires careful planning and informed decisions. It is important to know about the do’s and don’ts to successfully apply for a bike loan.
The Do’s
Here are some things you can do to ensure a smoother application process:
Do Plan and Prepare
Before diving into loan applications, clearly define your two-wheeler needs. Do you need a fuel-efficient scooter for daily commutes or a powerful motorcycle for long rides? Consider factors like riding style, passenger capacity, and boot space.
Owning a two-wheeler goes beyond the loan repayment. Factor in ongoing expenses like fuel, insurance, maintenance, parking, and potential repairs. Create a realistic budget by keeping these costs in mind to avoid any financial strain.
Also, plan for a higher down payment. This helps reduce the loan amount, leading to lower interest payments. While a larger down payment might seem daunting, it can save you money in the long run.
Do Research and Compare
Don’t limit yourself to a single lender. Research and compare loan offerings from banks, NBFCs, and even your two-wheeler dealerships. Each option has its pros and cons:
Banks generally have stricter eligibility criteria but might offer lower interest rates. NBFCs often have quicker processing times and flexible repayment options. However, their interest rates may be comparatively higher. Dealer financing can also be a convenient option. But, compare the interest rates and terms offered with other lenders to ensure that you get a good deal.
Focus beyond the advertised interest rate. Consider the effective interest rate, processing fees, prepayment penalties, and other charges. Loan tenure also impacts your monthly payments and total interest costs. Also, understand the two-wheeler loan eligibility criteria for each lender. These typically include age (usually over 18 years) and income stability (proved through salary slips or income tax returns).
Do Strengthen Your Application
A healthy credit score reflects a good financial history. It can help you get lower interest rates on your loan. Review your credit report regularly and address any issues to get a better score. If your credit score is low, consider taking steps to improve it before applying for a two-wheeler loan. This might involve making timely repayments on existing loans or credit card dues.
Keep all required documents readily available to speed up the loan’s processing. These typically include:
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- Identity Proof: Any one of the following
- Aadhaar card
- PAN card
- Voter ID
- Passport
- Address Proof: Any one of the following
- Utility bills
- Rent agreement
- Receipts of property tax
- Identity Proof: Any one of the following
- Income Proof:
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- Salaried Individuals – Salary slips and bank statements
- Self-employed Individuals – Income tax returns and business financials
- Two-wheeler purchase documents (if any)
The lender may ask you to submit additional documents. Reach out to your financial institution for a complete list, prior to applying.
Do Negotiate
Once you have compared the loan options, discuss the terms. Negotiate for a lower interest rate and more repayment flexibility. When you have a good credit score and make substantial down payments, it can create a favourable environment for negotiations.
Lenders may offer free insurance and roadside assistance with their loan options. Consider these when choosing a lender. Before finalising the loan, meticulously review the loan agreement. Note the repayment terms, interest rate structure, prepayment charges, and other costs. Ask questions to clarify all your doubts about the loan terms and their impact on repayment.
The Don’ts
The following points will help you avoid the challenges involved in getting a bike loan:
Don’t Fall for Shortcuts and Traps
Don’t get lured into borrowing more than you can comfortably repay. Consider your existing debts and ensure the EMIs fit your budget. Be mindful of processing fees, prepayment penalties, etc. These can lead to an increase in the loan’s cost. Choose a lender with transparency who reveals all the fees and charges beforehand.
Providing false information on your loan application can lead to rejection. It can also lead to legal complications. Be truthful and transparent in your application.
Don’t Delay Your Payments
Make your loan repayments on time to avoid late payment penalties. This can also help evade potential damage to your credit score. Maintaining a good repayment history strengthens your creditworthiness for future loans.
Owning a two-wheeler involves ongoing expenses like fuel, insurance, maintenance, and potential repairs. Factor these costs into your budget. Create an emergency fund to cover unexpected expenses.
Having third-party two-wheeler insurance is compulsory in India. However, getting a comprehensive policy ensures your bike is also protected. Compare different plans and choose one that offers adequate coverage.
A bike loan can be a valuable tool to finance your dream of owning a bike or scooter. By following these do’s and don’ts, navigate the loan application process with confidence. A well-informed financial decision can help you get the bike of your dreams.
Source: Explore
