Every day, a large number of people rely on two-wheeler loans to fulfil their various financial needs. It is no surprise that many take two-wheelers as they are one of the most preferred modes of transport in India.
The availability of two-wheeler loans makes it even easier for people to acquire them without facing much hassle.
Even though there are several lenders offering these loans, it would be better if you consider some factors before taking one.
- Budget: This is a very important factor because if you do not have ample amount to spare out at the same time, then taking a loan will not provide any help. As such, always ensure that you have a sufficient amount set aside every month as two-wheeler loans are paid in monthly instalments, also known as EMIs.
Taking a loan is always contingent on the kind of income you earn and as such, it would be best to compare your current income with what you expect in future. Lenders can also ask for your previous three months’ lender statements to verify the amount that comes into your account.
- Loan Eligibility: Two-wheeler loans are approved based on the applicant’s eligibility. Each lender has separate eligibility criteria. It is important to check if you fulfil all the eligibility criteria before filling up any loan application form. Common eligibility conditions include a minimum income, relevant documentation, and more.
- Comparing two-wheeler loans from different lenders: Rates of interest and charges like processing fees, pre-payment penalties can vary from one lender to the other. You should always ask for clarification if you are not sure about any terms in a loan agreement before applying for it.
Even though the comparison between different lenders would show that their rates are similar, always compare both the rate and charges as well. Apply for only those two-wheeler loans that have flexible tenures and charges so that you can make changes later when needed.
- Loan amount: The larger the loan amount, the higher will be your EMI. It is also important that you take into account other expenses like insurance, maintenance and fuel while taking a two-wheeler loan. Loan tenures are usually of three years or five years and most people choose five-year loans so as to avail themselves tax benefits.
- The LTV Ratio: The loan-to-value ratio is the amount of money that you are borrowing compared to the value of your two-wheeler. Most lenders have a 60-80% LTV ratio. But there are certain lenders, such as Muthoot FinCorp, which offer 100% of the vehicle’s on-road value as a loan, depending on your eligibility.
- The Interest Rate: The interest rates on two-wheeler loans can vary from lender to lender and usually hover between 10%-15%. If you want to save on interest costs and lower your EMI payments as well then it is best to compare offers from multiple lenders. Using a two-wheeler EMI calculator will ensure that you incorporate the interest component along with the principal amount to populate a comprehensive table for your information.
- Loan period: The longer the tenure or loan period, the lower will be your EMIs. If the repayment tenure is five years instead of three years, then it could mean 25% higher EMI and a much bigger burden on your budget than otherwise. Although a longer tenure will lower your EMI, the interest component will increase, increasing the total cost of the loan. You can use the two-wheeler loan EMI calculator to find out a comfortable tenure, based on your budget.
It is important to keep these factors in mind when taking a two-wheeler loan. Doing enough research, looking for festive offers and choosing a trusted lender, can help you secure a two-wheeler loan easily and at a low cost.