It doesn’t matter whether you are a student, salaried individual, or a businessman, commuting is an important part of our lives which can’t be ignored.
While public transportation is cheaper and good for the environment, it’s not always the best option. So, if you are living in an area where public transportation is not readily available, then buying a motorcycle or a scooter is a good way to deal with the problem.
Now, the problem is that a large number of 2-wheelers can be quite expensive, especially for someone who has just started earning.
This is where a Loan comes in.
Although the interest rate of these (10% to 18%) are usually higher than car loan interest rate (8.5% to 15%), you can still get a good deal if your credit score is good and/or if you have been a good customer to the bank.
Types of 2-Wheeler Loans
All 2-Wheeler Loans can be divided into two categories:
- Secured: In a secured loan, you can offer a property, gold, or any other asset as collateral to make the loan “secure”. However, in most cases, it’s the 2-wheeler itself that serves as collateral.
- Unsecured: A loan which is not secured by any collateral is called an unsecured loan. In this type of loan, there is no risk on your end. However, obtaining it can be tough especially if your CIBIL score is not up to the mark.
Loan Eligibility Criteria
Compared to home loans or even car loans, 2-wheeler loans are quite small (usually as much as Rs. 1.5 lakhs) in amount. However, there are still certain conditions that you must fulfill to qualify. These are:
- Age: Most financial institutions require the loan applicant to be at least 18 years of age, which is also the minimum age to qualify for a driving license.
- Job Experience: Usually, you are required to have at least one year of job experience if you are a salaried individual. It’s also good if you have been working for the same company for a while as it shows reliance as opposed to those who switch jobs frequently.
- Business Status: If you are a businessman, then again, your company should have been operational for quite some time. It should also be cash flow positive with minimum to no debt at all.
The standard process for applying for a 2-wheeler loan is almost the same as the majority of banks and other financial companies. The three main documents that you will be required to submit are:
- ID Proof: PAN, Voter ID, Aadhaar, etc.
- Address Proof: The utility bill, telephone bill, or a bank account passbook.
- Income Proof: If you are a salaried individual, then you can provide your salary slip or bank statement. If you are a business owner, then you have to provide your balance sheet, audited financials, sole proprietorship declaration, etc.
Things to Know
The following are the most important things to know before you apply for a 2-wheeler loan:
- The interest rate you get can be greatly affected by your CIBIL score. So, be sure to improve it as much as possible before you start sending the applications.
- Most lenders impose a processing fee that’s added to the loan amount and varies between 1% to 4%. So, make sure you inquire about that before signing above the dotted line.
- There is a lot of competition in the market and a variety of loan products to choose from. So, take your sweet time and shop around. It will help you find the best product for your requirements.
- The majority of 2-wheeler loans can have a tenure up to 3 years. If you go for a longer term, you have to pay smaller EMIs but at the cost of a high interest amount. On the other hand, if you choose a short-term, then the EMIs will be bigger but the interest amount will be smaller. So, choose wisely.
- You are most likely to find a big difference between a car loan interest rate and a 2-wheeler loan interest rate. However, it’s up to you whether you want a 2-wheeler only or whether it’s better to go for a car instead.
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