In India, many people prefer using two-wheelers to commute to work or an outing. Their fuel efficiency, rough build and low cost make them the perfect fit for the average Indian family. If you’re looking to buy a new two-wheeler, availing a loan can make such purchases affordable. A two-wheeler loan can help you fulfil your dream of buying a vehicle without having to take a chunk out of your savings. Moreover, their low interest rates are even more conducive and ensure you can pay off your loan smoothly.
But how do you get the best two wheeler loan for your purchase? You can achieve this by getting nominal interest rates. Here are a few helpful tips to avail of loans at low interest rates.
- Maintain a good credit score
When lenders come across an applicant, they see their credit score first. Your credit score is a number assigned to you by the credit bureau (CIBIL in India). It indicates your credibility as a borrower. The higher your credit score, the more likely you will get approved for a loan at a low interest rate. Hence, having a good credit score should be your top priority.
There are various ways in which you can maintain a good credit score. These include:
- Pay your EMIs on time: Timely payment of your EMIs for a few consecutive months will automatically improve your credit score.
- Do not apply for a credit card right after rejection: Because you apply for a credit card, the lenders carry a soft inquiry about your credit score. Frequent soft “pulls” can, in turn, affect your credit score.
- Do not be a defaulter: You need to pay the dues on time, whether it is your loan or credit card bills. Being a defaulter is one of the things that affect your credit score negatively.
- Low credit utilisation ratio: Credit utilisation is the percentage of the total available credit you borrow every month. If you borrow a considerable portion of your total revolving credit, it implies that you are financially dependent on your borrowed money. This lowers your credit score. So, try to limit your credit utilisation ratio to below 30%.
All of these, when done together, can significantly improve your credit score. This may help you apply for a loan with a lower two wheeler loan interest rate.
- Low debt-to-income ratio
Debt-to-income ratio is an important parameter considered by lenders while approving any loan. If a significant portion of your gross income (income after tax) goes into repaying debts, then it indicates that you are under a lot of financial obligations. Hence, new lenders might not want to give you a loan at a low interest rate.
- Keep all your documents in place
The basic documents required for a two-wheeler loan are a valid photo identity proof, a valid address proof, two passport-size photographs and a bank statement of the last three months. The proof of income varies for salaried and self-employed individuals. For salaried applicants, your letter of employment is mandatory. Other than this, as proof of income, either the salary slips of the last three months, Form 16 or the ITR of the previous financial year needs to be submitted.
Self-employed individuals would need to produce the most recent ITR document, a TDS certificate and documents showing details of the company they own (if applicable) to avail of two-wheeler financing.
- Use your credit card regularly
Regular credit card usage means that you are an active yet responsible borrower. This increases the likelihood of getting a great deal on your two-wheeler loan.
- Repay your existing debts
Numerous existing debts might discourage a lender from giving you a loan at a low interest rate. This is because your financial commitments might make it difficult for you to handle any new loans. Hence, close as many existing loans as possible. Additionally, once you avail of the two-wheeler loan, keep checking the two-wheeler loan statement to ensure you pay the dues on time.
- Show proof of increase in income
If you can show proof of income increase, the lenders might consider lowering the interest rate on your two-wheeler loan. One way to do this could be to get a promotion or find ways to increase the profit of your business. However, you can also find secondary sources of revenue to improve your overall income.
- Request the lenders
This is an aspect that isn’t talked about often. An open conversation with the lender can help you get better deals.
In a nutshell
You can get a favourable interest rate on your two-wheeler loan in many ways. Lenders like Bajaj Markets offer two-wheeler loans at nominal interest rates. Additionally, you can follow the helpful tips mentioned in this article to maintain – or increase your credit score. By maintaining a good credit score, you can avail of up to 100% financing of the vehicle’s on-road price.