The need for a two-wheeler loan is increasing by the day, especially as the prices of the two-wheeler vehicles keep on increasing. Two-wheelers are no longer just the way to commute. Rather they define much more than that. Owning a premium two-wheeler helps you create a statement. The need for two-wheeler vehicle is changing now. From easy commute and less fuel consumption to start a trend.
The prices of a two-wheeler can go from anywhere between 25,000 Rupees to well over 25 lakh Rupees, depending upon the choice of brand.
What are Two-Wheeler Loans?
A two-wheeler loan is targeted specifically towards the audience that needs financial aid to purchase a good two-wheeler vehicle. The average cost of a reliable motorcycle is nearly 50,000 Rupees. The two-wheeler loans can help you purchase your dream two-wheeler. Banks give loans for two-wheelers depending upon the type of the vehicle as well as the purpose of the vehicle. In case you wish to start a rental service with the two-wheeler that you purchase, you might have to opt for a business loan.
The most recent budget launched in April 2017, has lowered the interest rates on the loans by a small amount. The final cost of the two-wheeler will hence reduce by a small percentage. Certain governmental and private organizations also fund their employees to buy a new two-wheeler vehicle which you can use in addition to the loan that you get from the bank.
When you go for availing a two-wheeler loan, you will come across a variety of loans. Let us have a look at the most popular options for two-wheeler loans.
Types of Two-Wheeler Loans
Some of the two-wheeler loans that you may come across while applying for a loan are classified below. The names for these two-wheeler loans may differ from bank to bank. 5 of the most common two-wheeler loans include,
- Secured Two-Wheeler Loans– The secured two-wheeler loan is like any other secured loan. You need to provide a collateral for getting a secured two-wheeler loan from the bank. The rate of interest for a secured two-wheeler loan is usually much lesser than the one for an unsecured loan. You need to present a collateral that is either equal or more than the amount that you borrow from the bank. In case you are unable to pay back the loaned amount in the stipulated amount of time, you risk losing the collateral property. Therefore, it is advisable to risk the exact amount for the loan that you borrow so that you do not end up in a loss.
- Unsecured Two-Wheeler Loans– Getting an unsecured loan is a tough compared to the process of getting a secured loan. Since you do not provide a collateral to the bank, it assesses your credit score heavily before granting you a loan. You need to make sure that you have a really good credit score to get an unsecured loan fast. However, you might need to follow several criteria before being eligible for an unsecured loan.
- New Two-wheeler Loan– As the name suggests, this loan is given to the person who wishes to purchase a new vehicle with the money that he/she gets. It is generally easier to get a new two-wheeler loan compared to a used two-wheeler loan since your vehicle has far lesser chances of breaking down.
- Used Two-wheeler Loan– It is tougher to get a loan for a used two-wheeler since your vehicle has a shorter lifespan after being used by the previous owner(s). However, you can get a loan quickly in case you are purchasing a used two-wheeler from an authorised refurbished seller. Some sellers even help you finance the vehicle and get loans faster as a part of their policy.
- Two-wheeler Refinance Loan– A refinancing loan is usually considered as a loan over a loan. In case you are unable to pay the instalment of a particular two-wheeler vehicle loan, you can opt for a refinance loan. In this case, the money lender pays off your debt and you can pay him/her back in smaller instalments. However, it is inadvisable to use this method to pay off loans since you end up paying a much larger interest fee by the end of the term.
When to Apply for a Two-Wheeler Loan?
You must apply for a two-wheeler loan strategically to get the maximum benefits. The time as well as theamount of loan matter a lot when you are purchasing a high-end vehicle.
- Holidays – Most of the auto makers come up with great offers during the holidays. In fact, several auto makers claim that their sales increases by several folds during the holiday season. It is advisable to book a vehicle and apply for a loan during the summer or winter holidays to get the maximum benefits. Some companies also come out with annual sales and bonanza offers which can benefit you by reducing the final costs of your vehicle by a great margin.
- Offer Season – Offer seasons are a biannual or an annual thing in India. During this season, most of the companies come up with great offers to attract the customers and increase the sales. Some of the offers that you can look for during the offer season include discounts on specific petrol stations, free vehicle insurance, zero processing fee, etc. To support the sales of these auto makers, several banks associate with particular auto makers to bring out the lower interest rate loans for a small period.
- Festivals – The festival duration is the best time to buy a new vehicle on loan. Both the banks as well as the auto makers come out with several schemes and discounts to attract customers. Even if you do not plan on taking the vehicle home for a considerable period, you can book it and make advanced payments during the festive season to avail these benefits.
Before applying for a loan, you must consider the following factors to save on the interest fees as well as get benefits of applying at the right time.
- Vehicle Insurance – The two-wheeler vehicle insurance is a significant cost that you cannot ignore while purchasing the vehicle. You need to factor in the total cost of the vehicle plus the vehicle insurance and then calculate the amount of loan that you require from the bank. During the festive season, you can avail a free vehicle insurance in case you buy a high-end vehicle. Some manufacturers also offer an extended service period and warranty for the vehicle during the festive/offer season.
- Added Costs – The added costs of the vehicle can sometimes lead up to a huge amount. When you talk to the vehicle salesmen, make sure that they clearly state the extra costs or features of the vehicle. You must always ask for an on-road price instead of a showroom price before making up your mind to buy a particular vehicle. The vehicles with ABS and other protection feature can help you reduce cost on your insurance.
- Discounts – If you are good at bargaining, you might end up saving a considerable amount of money. Make sure you ask for a referral or a seasonal discount when you buy the vehicle. In certain cases, buying the vehicle in an off-season can help you since the salesmen are forced to make a sale and can lower the prices to do so.
- Type of Two-Wheeler – Be very clear about the type of two-wheeler that you wish to purchase. You must always choose a reliable vehicle with access to a good, nearby service centre to make repairs. Under certain circumstances, the vehicle repair cost can rise up to a huge amount after the end of the warranty period.
Best Banks for Two-Wheeler Loans
Most of the banks that offer a car loan also offer a two-wheeler loan. Some of the top banks that offer a two-wheeler loan at a low rate of interest include,
- Capital First Bank,
- Kotak Mahindra Bank,
- ICICI Bank,
- Aditya Birla Bank, etc
Make sure that you assess the processing fee and the hidden charges with the banks before applying for the loan. It is better to go for a bank with a slightly higher rate of interest in case it offers a negligible processing fee over a bank that charges a lot of processing fee.
Eligibility Criteria for a Two-Wheeler Loan
The eligibility criteria for a two-wheeler loan is similar to that of a car loan. The major criteria include,
- Good credit score,
- Account with the particular bank,
- Minimum 21 years of age and maximum 60 years of age.
Some banks might have extra criteria such as a minimum income rate for granting the loan. These criteria might differ from bank to bank and person to person.
List of Documents Required for Application of a Two-Wheeler Loan
You require the following documents while applying for a two-wheeler,
- Identity Proof – Pan Card, Driving License,
- Proof of Residence,
- Bank Statement – For the account where you deposit your salary,
- Salary Slips for the past 3-4 months,
- Passport Size photographs.
You might require some extra documents too depending upon the requirements of the bank.
Benefits of a Two-Wheeler Loan
You get access to several benefits when you apply for a two-wheeler loan. Some of these benefits include,
- Lesser Rate of Interest – You can get a two-wheeler loan at a lower rate of interest compared to a personal loan. When you intend to buy a vehicle on loan, it is always advisable to go for a specific vehicle loan than taking a personal loan.
- Long Repayment Periods – The loan repayment period for a loan can last from a few months to several years depending upon the amount loaned.
- Flexible Loan Choices – Several banks offer flexible loan choices with a variable rate of interest. You can calculate the rate of interest for the variable rate as well as fixed rate and opt for the option that costs you less. It is advisable to always compare multiple banks as well as loan types before choosing one to get the best deal.
- Festive Benefits – You may be entitled to festive benefits such as zero processing fees of negligible late payment fees when you buy a vehicle during the festive season. Choose the time of purchase very carefully to avail the maximum benefits.