What are The 5 Factors that Affecting Bike Loan rates?
Whether the purpose is commuting, racing, or just recreation, the sales of bikes have always been stronger compared to four-wheelers. Rising bike prices can burn a hole in your pocket with increasing popularity across India.
To tackle such situations, two wheeler loans come to the rescue. Most individuals opt for a cost-effective two-wheeler loan. Reputed NBFCs can finance your bike for up to 85% of its on-road price at low-interest rates. Let us elaborate on the primary factors determining interest rates on a two-wheeler loan.
Key Five Factors that Affect Bike Loan Interest Rates
- Credit Score
An individual’s credit score is a number between 300-900 in India. 750 is a good score, and 900 is the highest score an agency can assign to an individual. It is assigned to an individual by credit rating agencies after considering various factors. The applicant’s credit score must be high based on the spotless credit history to secure the lowest two-wheeler loan interest rate. If you are a disciplined individual who repays all your financial obligations on time, the lender can offer you a reasonably low interest on your bike loan. Your high credit score with a sound credit history reflects your good creditworthiness and how well you have treated your loans or credit card bills in the past. A loan application with a high credit score brings reduced risk for lenders, and therefore they can offer a lower interest rate on bike loans.
The credit score is calculated based on the following factors primarily:
- The total number of loans an applicant has taken in the past.
- The total of all loan amounts.
- Timely EMIs, a borrower has made in the past.
- Missed or delayed EMIs, if any.
Thus, to secure a bike loan at a low-interest rate, you can maintain a high good credit score.
- Loan Amount
The amount a loan-seeker has applied for is the most crucial factor the lender considers to decide on the two-wheeler loan interest rate. A high loan amount will attract a higher interest rate. The higher the bike cost, the larger the loan amount that will increase the interest rate. Since the lender is lending you a higher loan amount, it will increase the risk if the borrower defaults. Therefore, the lender charges a higher interest rate to justify their risk on a bike loan. Apply online and increase the down payment or decrease the loan amount to reduce the interest rate.
- Loan Tenure
If you are considering a longer tenure to lower the bike EMIs, then you should know that the longer the loan tenure, the higher the interest rate. Simply because if you take a longer time to repay the loan, it will increase the risk of default associated with your loan. It is better to choose a shorter tenure for your bike loan. Before making a loan application, you can use a two-wheeler loan EMI calculator to know how much you will need to pay during your preferred loan tenure.
- Type of the Vehicle You Choose
The interest rate is also determined by considering the type of bike you are intended to buy. Generally, lenders charge a higher interest rate on luxurious or high-end bikes. Also, the lender evaluates the bike’s resale value. A better resale value will decrease your two-wheeler loan interest rate because if you default on loan repayment, the lender can recover the outstanding balance by auctioning the bike at a higher resale value. Thus, the bike loan interest rate varies as per the category and the model of the two-wheeler you choose.
- Dealership Location
You must have seen that the cost of the same bike differs from one location to another. Also, the taxes and the manufacturer’s cost of delivering the vehicle differ by location. Since the bike price varies in different locations, the loan amount required to buy a bike will also vary. It will owe to either a higher or lower interest rate levied to you. Therefore, research well and find a dealership where your desired bike is significantly lower.
Thus, if you keep these factors in mind, you can get a low-interest rate bike loan. Apply online with a renowned NBFC to reduce your bike loan cost.
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