Indian cities have become increasingly congested these days, making two-wheelers the easiest, fastest, and most affordable mode of transportation. Apart from their stylish looks and easy manoeuvrability, they are also fuel-efficient. As a result, they are the best vehicles for short and long-distance travel. Although Indians’ spending power has increased considerably over the last few years, many can still not buy a bike upfront. In fact, it makes very little sense to finance a bike purchase from your hard-earned savings.
So, what’s the best way to finance a two-wheeler in India? Well, bike finance in the form of a two-wheeler loan is beneficial for many reasons. Read on to learn more.
What is a Two-Wheeler Loan?
A two-wheeler loan is the best bike finance option easily available these days. It lets you purchase your dream bike by paying as little as 5% of its cost from your savings. That means the loan provider provides 95% of the bike’s price as a loan. Once you secure a loan and purchase a bike with it, you must repay the loan to the lender in Equated Monthly Instalments. Each EMI consists of some portion of both the principal and the interest amounts.
The bike’s lien remains with the lender until you repay the total loan amount. If you default, the lender can seize and sell the bike to recoup their loss. Once you repay the loan, you get complete ownership of the bike. When looking for a bike loan, you will find several leading finance companies offering loans with competitive terms and conditions. You must compare the available loan offers to make an informed decision and minimise the cost of borrowing,
Benefits of Financing the Bike Purchase with a Two-Wheeler Loan
While we state that taking a two-wheeler loan is the best source of bike finance, you must be wondering why. Let’s look at the compelling benefits of bike loans that make them the best financing option:
- High LTV Ratio:
Reputable NBFCs like Hero FinCorp finance as much as 95% of the bike’s price, meaning you can bring your dream bike home by paying only 5%. A high LTV ratio reduces the need for a hefty down payment, making it easier to own the desired bike.
- Savings Kept Intact:
Even if you have enough funds to purchase a bike, consider financing it with a loan instead of exhausting your savings. You can invest your savings elsewhere to earn interest or keep them intact for emergencies.
- Access to the Better Bike Model:
Since your selection is not limited to your savings, you can opt for a better bike model with a loan. Remember, you don’t need to pay its price upfront but distribute the EMIs over a longer term.
- Quick Loan Approval and Disbursal:
Another significant benefit is the speed at which modern NBFCs process and disburse the loans. With 100% digital procedures, lending institutions can accept applications, verify details, check documents, and process loans in minutes. The speed of disbursal lets you purchase your dream bike without any waiting periods or funding delays.
- Minimal Documentation:
These days, many modern loan companies use digital applications and biometric validation procedures to make the loan process simple, quick, and hassle-free. Minimal documentation requirements significantly reduce the time required to apply for a loan.
- Flexible Repayments:
Lenders offer flexible repayment options. You can choose a tenure with EMIs that suits your financial condition. Use an EMI calculator to estimate the EMIs according to your desired loan amount, repayment tenure, and the offered interest rate. The repayment flexibility ensures you can choose a tenure with budget-friendly EMIs without straining your finances.
- Competitive Interest Rates:
Compare various loan plans and choose a financial institution offering the lowest bike loan interest rate. A lower interest rate reduces interest outgo and EMIs, making the bike loan more cost-effective.
- Opportunity to Enhance the Credit Score:
Borrowing a two-wheeler loan and repaying its EMIs diligently positively impacts your credit score. Consequently, your eligibility for future loans also improves by showcasing creditworthiness and financial discipline.
Important Points to Remember When Borrowing a Bike Loan
Now that you have decided to borrow a bike loan to finance a bike purchase, here are a few important points to remember:
- Build a Good Credit Score:
A good credit rating strengthens your odds of getting bike finance by projecting you as a creditworthy borrower in the eyes of lenders.
- Reduce Your DTI Ratio:
Lenders will not trust you for timely repayment if you are already indebted heavily. As a result, they will reject your loan application or charge a higher bike loan interest rate. Instead, clear your outstanding dues to reduce your DTI ratio before applying.
- Purchase a Bike in Budget:
Although you can finance up to 95% of the bike’s cost with a loan, you should consider your repayment capacity before borrowing.
- Make a Bigger Down Payment:
Even if you have an LTV ratio of up to 95%, you should make a higher down payment to reduce your loan amount and minimise your financial burden. Remember, a higher loan amount will increase your debt burden and total interest outgo.
- Check the Options:
Reputable NBFCs are always the best options for bike loans. However, you must check and compare the loan offers to get the best deal.Â
- Avoid Multiple Applications:
You might believe that applying for several loans will ensure you get approval from at least a few of them. However, this is the worst strategy that reduces your eligibility. Instead, research extensively to find the best financier in your location and apply for the most appropriate one.
Motorbikes are a necessity in modern busy life. However, if they seem unaffordable with your personal finances, finance the purchase with a bike loan and spread its cost into EMIs. Hero FinCorp finances up to 95% of the bike’s cost with a loan, giving easy access to your desired bike without paying its price upfront. With the above benefits and tips to apply for bike finance, you can enjoy your dream ride without any financial worries.