A two-wheeler vehicle is among the most popular transportation mediums in India. There are two main reasons behind this popularity: fuel efficiency and the cost of the vehicle. Besides this, two-wheelers are a lifesaver during high traffics on the road. However, buying a two-wheeler can be expensive for many people. Therefore, a two-wheeler loan is a great choice to finance the purchase. There are various factors to consider before choosing a loan. Let’s take a deep dive into these factors.
Factors to consider before taking a two-wheeler loan
Here are some of the most important factors to consider before taking a two-wheeler loan.
1. Purpose of the loan
The most crucial factor to consider before taking the loan is its purpose. Unlike some other loans like personal loans, two-wheeler loans can only be used to finance the purchase of the vehicle. It can’t be used for any other purpose. For example, you can’t take a two wheeler loan to repair an old bike or scooter. Knowing which exact two-wheeler model you want to buy will give you a good estimate regarding the loan amount.
2. Interest rates & repayment terms
The interest rate on any loan represents the cost of borrowing funds. Similarly, for a two-wheeler loan, the interest rate will give you a good idea regarding the cost of borrowing money for the two-wheeler purchase. A high-interest rate will increase the repayment amount. It will lead to higher EMIs. Therefore, it is highly recommended to compare different interest rates and find the best one.
Besides the interest rate, you should check the repayment terms on the two-wheeler loan. Many lenders allow borrowers to prepay the loan amount without any fee. However, some lenders charge a prepayment penalty. It is important to check the prepayment terms to avoid any additional charges. Prepaying a loan can help you save funds on interest charges. Therefore, it is highly recommended to prepay the amount in part or full whenever you can.
3. Eligibility criteria
Eligibility criteria for a bike or two-wheeler loan can be explained as the minimum requirements for getting the loan. Different lenders will have varied two-wheeler loan eligibility criteria. However, there are many commonalities regarding age, income, credit score, etc. Eligibility criteria are set to avoid applications from people who might not be the right prospect from the lender’s point of view. Therefore, checking the eligibility criteria the lender sets before applying for a two-wheeler loan is essential.
4. Down Payment
The down payment amount is the upfront money paid by the buyer to purchase the vehicle. Different lenders will have different criteria regarding the down-payment amount. However, most two-wheeler loans require a down payment of 10 to 25%. The down payment reduces the amount you need to borrow and can also help lower the interest rate on your loan. Generally, the larger the down payment, the lower the interest rate. Therefore, paying a higher amount as a down payment for any loan is advised. Before applying for the loan, you must have at least 10% of the overall vehicle cost for the down payment.
The documentation requirements are one of the most important things to consider before applying for a loan. Most lenders require documents like identity proof, address proof, income proof, credit score, etc. Depending on the lender’s requirements, you may also need proof of insurance for your two-wheeler and other relevant documents. It is essential to check these requirements on the lender’s website and have the documents ready before applying for the loan. Not submitting all essential documents can lead to delay or rejection of your application.
A two-wheeler loan is a great way to finance the purchase of a two-wheeler vehicle. However, it’s essential to consider various factors, including interest rate, repayment term, down payment, documentation, etc., before making a decision. By understanding these factors, you can make an informed decision and choose a loan that meets your financial needs and goals. Lending intuitions like Fullerton India offer a hassle-free loan process and have a customer-centric approach. Apply for a two-wheeler loan today.