These seven aspects to consider before applying for a two wheeler loan
If you have been planning getting a two wheeler loan for some time now, then this article is for you.
In this article we will discuss the top 7 important aspects require to consider before taking a two-wheeler loan in India.
Do you want to buy your dream two-wheeler but can’t manage the finance? You do not have to worry about it.
You can manage money for your dream two-wheeler and make your dreams come true by taking out a two-wheeler loan.
There are many types of two wheeler loan schemes available in the Indian market, so we should be careful when applying for them. In this article we will tell you seven things to keep in mind while applying for a two wheeler loan.
The terms and conditions of the loan are different from different banks and financial institutions, so it is very important to do research before applying.
1. Your Credit Score
Most two-wheeler loans in India are unsecured. Credit Score is one of the most important aspects lenders take into consideration while assessing your two-wheeler loan application. Your credit score depends on four main factors:
- Number of loans you have taken
- Amount of loan you have taken in the past
- Number of payments you have missed
As you know, In India, every borrower is given a credit score on a scale of 900. Most private sector banks and Non-Banking Finance Company offer two wheeler loan online approval options. However, you require to have an established credit score or credit history.
2. Do research first
The terms and conditions of the loan differ from one financial institution to another.
Apart from this, there is also a difference in interest rate, maximum loan amount and loan to value (LTV) ratio.
When applying for a loan, one should be prepared to pay various fees associated with two-wheeler finance such as processing fees etc.
Along with this, also understand the hidden rules of various lenders that people are not generally aware of.
These rules can affect your loan application. Through good research, you can also find information about such lenders who do not charge processing fees or charge very little.
3. Type of Loan
In general, there are two types of loans available, secured and unsecured for two-wheeler loans.
A secured loan dictates that you need to collateral or pledge an asset with the bank or financial institutions, which is of the same or equal value as the loan amount.
On the other hand, you do not have to collateral or pledge any asset to avail an unsecured loan for your vehicle loan.
In India, most two-wheeler loans are unsecured, there are some banks, financial companies, or lenders who provide secured loans as well that usually have lower rates of interest.
4. Loan amount
Many banks offer 90% to 95% loans on two wheelers. The loan-to-value (LTV) ratio depends on factors such as the type of two-wheeler and profile of the borrower.
You should compare the LTV ratio offered by different banks or financial institutions and the loan amount.
You may not like the fact that the two-wheeler you want to buy costs 1 lakh rupees, but the banks give you a maximum of 20 thousand rupees.
So, choose the lenders who offer enough loan amounts as per your requirement.
It may be that you are given a higher loan amount than you need and are tempted to buy a more expensive two-wheeler.
In such a situation, you should act with a cold mind. If the amount of monthly EMI is high, you may also face difficulty in paying it.
5. Tenure of Your Loan
The most important aspect you require to consider in order to get the best two wheeler loan is the tenure of the loan.
Most banks in India offer a 12 to 60 months tenure, so that you can effectively manage your personal finances.
You should keep in mind that a longer tenure generally indicates that the loan will arrive with a higher interest rate. So, you should opt a loan with a shorter tenure.
6. Affordable interest rates
Banks or financial institutions determine loan eligibility and interest rates based on factors such as the employment status, applicant’s income, age, and credit history.
You do not need to have a strong credit record to get a two-wheeler loan approved, but a strong credit history will help you get a two-wheeler loan at a reasonable rate.
The annual percentage rate (APR) should be compared with different banks or financial institutions.
APR involves the cost and expense of getting a two-wheeler loan. Therefore, it is advisable to choose a lander, banks or financial institution that provides a two wheeler loan at a reasonable rate.
7. Special offers
Most banks or financial institutions offer attractive loans to their customers during the festive season. Some even offer festival and seasonal discount offers like Diwali Sale and monsoon sale.
This offer may include zero down payment, low interest rate, 100% loan, zero processing fee etc.
Also, if you are already a customer, you have a better chance of getting a loan at a lower interest rate than new customers.
Documents Required for Two-wheeler Loan
Mentioned below is a list of documents required for a two-wheeler loan for self-employed professionals as well as salaried person.
Self-employed Professionals
- Income proof – Latest bank statement, ITR, Income Certificate
- eKYC documents – PAN Card, Aadhar Card, Voter ID, etc.
- Passport size photographs and Cancelled cheque
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Salaried Professionals
- Income proof – Salary Slip, Latest bank statement
- Passport size photographs and Cancelled cheque
- eKYC documents – Voter ID, PAN Card, Aadhar Card, etc.