How to Choose the Best Two-wheeler Loan Lender?

Compare them based on several parameters, like interest rates, loan amounts, processing charges, and customer service, to make an informed decision. Let's take a look.

How to Choose the Best Two-wheeler Loan Lender?

Bikes are the most convenient vehicles in India. Consequently, two-wheeler loans are one of the most popular funding options for purchasing bikes. Technologically-advanced NBFCs support digital loan procedures, making a Bike Loan readily accessible in no time. However, choosing the first lender you come across is not the best strategy. Before narrowing down on a two-wheeler loan lender, you must remember several points to get the best deal. Compare them based on several parameters, like interest rates, loan amounts, processing charges, and customer service, to make an informed decision. Let's take a look.

Loan Amount

Although reputable NBFCs might finance up to 95% of the bike's on-road value, you must evaluate your own loan requirement first. Depending on the bike's purchase price, visit the lending institution's website and find the maximum loan amount they can offer. Besides this, evaluate your finances, savings, and down payment capacity before coming up with a loan request. Ensure that the lender can fulfil your requirement by lending you an appropriate amount.

Interest Rate

Interest rate is one of the most crucial factors to consider when comparing and finalising a two-wheeler loan lender. Lending institutions determine your interest rate based on your income, DTI ratio, work experience, occupation, etc. If you have a decent credit score, a stable income source, and fewer financial obligations, you can negotiate with the loan provider for favourable interest rates. Still, depending on your eligibility, different loan providers offer different interest rates. You must compare them to find the lowest rate to save money on the loan cost. In that case, a Bike Loan calculator will help calculate the loan cost based on your loan amount, interest rate, and repayment term.

Additional Charges

Loan companies charge various additional fees to offer their service and process your loan application. These include processing charges, internet charges, loan cancellation charges, and cheque bounce charges. If you plan to repay the loan before the term end, check the lender's prepayment charges. Ensure these charges are reasonable enough to keep costs low and maximise benefits.

Repayment Flexibility

Opt for a loan provider offering flexible loan repayment terms. The best thing you can do is to opt for the shorter loan term. It helps you get debt-free sooner and save money on the interest cost. However, it will increase your EMI amount and might cause a financial crunch in your monthly budget. Therefore, use a Bike Loan calculator to estimate EMIs for various loan terms and opt for the shortest possible tenure with budget-friendly instalments. Check the repayment terms of loan providers and opt for one with loan tenures suitable to your repayment capacity.

Lender's Credibility

Before taking out a Bike Loan, check the lender's credibility and reputation in the market before making the decision. Visit their website's "About Us" section to get an idea of this. If you are using a loan app to apply for a loan, read its online reviews to see what its existing customers say about them. Look for a loan company that has been working in the industry for a long and has a decent percentage of satisfied and repeat customers.

Funding Speed

There are times when auto companies offer special discounts on their bike models. If you wish to grab the opportunity, you will require funding at the right time before the offer period ends. At such times, the lender's approval and disbursal speed matter significantly. Modern NBFCs supporting digital loan procedures can process applications much faster than traditional ones. Also, look for a lender with eligibility conditions and documentation requirements that you can easily fulfil. It will avoid additional formalities that can prolong the loan procedure and delay the required funding to arrive.

Loan-to-Value (LTV) Ratio

While we suggest you save a big down payment amount to reduce the debt burden, you may prefer financing the bike's cost with a loan rather than spending money from your savings. That is when checking the lender's LTV ratio becomes important. With a reputable lending company, you can expect financing up to 95% of the bike's cost. However, they decide your loan eligibility based on your credit history, income, occupation, work experience, financial obligations, etc. That is why your income, DTI ratio and credit score matter significantly to getting the best loan offer.

Interest Calculation Method

Bike Loan lenders may calculate interest through various ways, including flat or reducing methods. The flat method calculates the interest based on your initial principal amount. For instance, if you borrow a loan of Rs 50,000, the total interest rate will be applicable on the amount over the loan term. On the other hand, if the lender uses the reducing method, they calculate interest after the EMI payment each month based on the outstanding balance. In this repayment scheme, the interest component is higher during the initial period of the term but decreases as the term progresses.

Since the two interest calculation methods greatly affect the total interest amount, you must know the lender’s procedure before proceeding with their loan application.

Application Procedure

Digital loan providers are beneficial in many ways over traditional lenders. They use advanced technologies and automated procedures to streamline the loan process and make disbursal much easier and faster. Without any paperwork and branch visits, a digital application procedure makes a two-wheeler loan much more accessible without hassle.

End-Use Restrictions

Many loan providers sanction loans for a specific type or brand of bike only. While looking for a loan, you must opt for a lender that makes loans available for the kind of bike you want to purchase, whether it is a commuter bike, off-road bike, scooter, or electric bike of your favourite brand.

Put some special effort into comparing Bike Loan providers based on these parameters. While comparing lenders, consider factors like their interest rates, loan amounts, LTV ratio, eligibility conditions, repayment terms, interest calculation method, etc. Proceed with a lender only if you find all these variables acceptable. Moreover, use a Bike Loan calculator to make an informed decision based on your loan requirement and eligibility.

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