Finance

Tips and Guidelines to choose the best two wheeler loan

A two wheeler is more than just a machine. It’s rather your ticket to personal mobility. Waiting for public transport to commute between work and home, and spending hours in traffic snarls is history. Just cruise your way in style and make heads turn riding your dream machine.

Purchasing a bike is easy and quick with a 2 wheeler loan. These loans are easily gettable at competitive interest rates with flexible repayment schedules and tenors. All you need to do is choose wisely. Here’re a few tips to help you choose the best bike loan, minus hassles.

  1. Determine the cost of borrowing:

Every bank and NBFC provides two wheeler loan but with varying interest rates. As the rates involve compound interest, even a minor difference, say 1% can push your loaning costs considerably. The only way out is to shortlist lenders and compare their interest rates. Note that, lenders calculate interest rates based on your income, CIBIL score and other factors. So, it makes sense to reach out to the lender to know the exact rates applicable to you.

While interest rates account for the largest share of the overall borrowing cost, other factors also contribute. The lenders charge processing fee, up to 1% of the total loan amount to sanction bike finance. Prepayment charges, penalty for delayed payments and other hidden costs might be involved as well. The trick here is to prefer a NBFC like Muthoot Fincorp that charges modest processing and prepayment fees and frees you of any penalty whatsoever.

  1. Know the LTV:

LTV is an abbreviation of Loan to Value. It represents the amount you get as a loan in relation to your bike’s ex-showroom price. The LTV is lender-specific. Some lenders keep it to 75% or less, while some might offer up to 100%. The fully financed scooter loan can relieve you from paying any down payment. However, such loans might come with a higher interest rate and longer tenors. If you have funds for the down payment, go for a lower LTV. But if you don’t, fully financed loans are the only option available. It’s the classic each-to-his-own proposition.

  1. Create a repayment schedule:
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Bike finance is a liability. It should be paid in full, principal plus interest within the pre-agreed time frame. Any default will lead to confiscation of your asset you pledged as collateral for the loan. In this case, it’ll be your bike. Having a convenient repayment schedule in place prior to loan sanction will relieve you from any such situation. People often prefer drawn out tenors to relieve the monthly burden of EMIs. But they end up paying higher interest.

It’s advisable to keep it as short as possible to limit your overall interest outgo. The thumb rule is to factor in your monthly income and existing liabilities and make decisions accordingly. Don’t forget to consider your age when deciding the tenor and repayment schedule. Lenders usually require you to be less than 65 years of age at the time of the loan term expiry.

  1. Choose the lender wisely:

The scooter loan is as good as the lender. Right from the interest rates to LTV to tenor and terms, every aspect of the loan depends on the lender. That calls for extensive research and wise choice. Here’s what to look for in your lender.

  • The lender must have a decent customer service in place to answer your queries and address issues, quickly and efficiently. Your loan tenor might stretch into years and putting up with a substandard customer service for so long is frustrating.
  • The lender’s 2 wheeler loan process has to be quick, efficient and transparent. It should accept applications online via website or app, and communicate your application status instantly. The approvals and disbursals should be streamlined.
  • The lender must have an easy eligibility criteria and simple documentation requirements. It should offer end-to-end assistance in paperwork and pick your documentation directly from your home or office as per your convenience.
  • The lender should be providing you with money saving offers from time t time to restrict your loaning cost. This might include zero service charges, free insurance and more.
  • The lender should be upfront with its charges. Hidden costs are not just unpleasant but might spike your spending.
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So, choose the lender which serves your custom needs the best. It would be helpful if you do further research and talk to a few representatives of these financial institutions to better comprehend the nuances of such a loan.

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