How to pick the best two-wheeler loan provider using these simple steps

It’s fascinating to find banks and NBFCs reaching out to you with two-wheeler loan offers. While it’s easy to obtain one of these loans and finance your motorcycle, you’d like the loan benefits from the best deals. While most borrowers have a look at the interest rate and settle for the least one, you also need to factor in other costs. So, how do you go about choosing the best two-wheeler loan provider?

Read on to understand how you can select the best loan provider when you apply for a loan to purchase your two-wheeler.

How to choose your motorcycle/scooter loan lender?

We have shortlisted some of the most relevant factors for loan comparison that you should consider while choosing your creditor.

Processing fee

Processing fee refers to the statutory fee that your creditor would charge when they process your application for a two-wheeler loan. Now, you can get this processing fee waived when you avail offers and deals provided by reputed banks. In other cases, the processing fee may constitute around 3% of the loan amount being sanctioned. 

Even if the lender offers the credit facility at a relatively low interest rate, find out the overall amount you need to pay by factoring in the processing fee. If it is unrealistically high, even a low interest rate won’t do much good.

Rate of interest

Of course, you would be looking for a low-interest two-wheeler loan. Some of the leading banks offer competitive loan interest rates for these credit privileges. You can obtain a motorcycle loan at 9.5% annual interest if your credit score looks healthy. 

On the other hand, it may rise to 21% if you don’t qualify with the first-line banks. Several factors determine your interest rate. If your credit report looks healthy, you can qualify for a low interest rate.

Foreclosure charges

At times, motorcycle owners decide to pre-close their loans to save on the interest. However, you need to shell out a foreclosure fee with some creditors. It would be wise to know these policies before you apply for the loan. In case the pre-closure charges are too high, there’s no point going for the lender. 

Some reputed banks and NBFCs do not charge anything as a penalty for foreclosing your loan. To be on the economic end, it would be wise to approach a lender that wouldn’t charge foreclosure fees from you.

100% financing option

Some NBFCs and banks are ready to finance 100% of the cost of your new motorcycle based on your loan eligibility. In these situations, you need not pay any amount as your down payment. This implies that even if you don’t have any cash in your hand at the time of the purchase, you can acquire the vehicle. 

Usually, borrowers need to pay 10% to 20% of the overall cost of the motorcycle as down payment. Wouldn’t it be wiser to reach out to a trusted creditor ready to finance your motorcycle completely?

Loan tenure

The loan tenure refers to the period throughout which you can repay the loan. The longer the loan tenure, the lower would be your EMI. The reason is, your liability gets broken down over a longer period of time. However, when you choose a longer loan tenure, you would be paying more interest to your bank.

Depending on your epayment terms and capacity, you should choose the EMI tenure. Some banks and NBFCs offer automobile loans with the tenure of as long as 8 years. If you are currently experiencing financial stress, you can choose a longer tenure. On the other hand, if the loan tenure is just 4 or 5 years, you would undergo unnecessary financial pressure. Go for a lender ready to offer a longer tenure for repayment.

Ease of application

 Even if the interest rate and processing fee are low, difficulty in applying for your two-wheeler loan is the last thing you would expect. The loan process shouldn’t be too complicated for the applicants. What if the disbursement period is too long or you face lots of complications with the loan documents while applying for your two-wheeler loan? 

Currently, many lenders process the loan online. It is a paperless process which turns out to be convenient for the borrowers. Look out for leading lenders ready to offer loans with this type of ease.

Reputation of your creditor

Well, this happens to be a frequently overlooked issue when you apply for your motorcycle loan. Make sure to take the loan from a bank or NBFC with a strong track record of their finances. Explore the review aggregator sites and check their customer reviews and financial reports to get a transparent idea of the credibility. 

The last thing you would expect is hidden fees to crop up. Neither would you like your interest rates shooting up after you obtain the loan.

How do banks fix their interest rates for two-wheeler loans?

Banks and NBFCs factor in several determinants while calculating the interest rates for two-wheeler loans. 

• Firstly, the lender would consider the type of two-wheeler you are purchasing while making the calculations. If you purchase a high-end bike, the loan amount would be higher. Considering the high amount of loan disbursed, reputed creditors might slightly lower your interest rate.
• Your location also makes a difference in the interest rate. For instance, you would be paying a lower two-wheeler loan interest rate if you reside in tier 2 or 3 city, rather than a metropolitan one. This is due to the difference in the standard of living in these locations.
• You would be paying a lower interest rate if you decide to make a higher down payment. A higher down payment reduces the risk profile of your lender. As a token of appreciation, they would offer you the loan at a lower rate of interest.

Take Away

We have discussed the elements that define a trustable creditor. Prioritizing your ease of loan repayment, loan requirements, and low EMIs, you need to narrow down your options. Lots of banks and NBFCs also offer seasonal discounts on interest rates for two-wheeler loans. It would be a logical decision for you to explore all the financing options available to purchase your new two-wheeler.