Whether you’re planning to buy a new bike or upgrade to a better one, taking out a loan can help you realise your dream. However, choosing a bike loan can be an arduous task, especially with various options available and the various factors to consider. However, tedious as it might seem, analysing these elements is essential so that you can make an informed decision that aligns with your financial goals and budget.
Let us discuss the top 5 points you should keep in mind before getting a bike loan.
Top 5 points to consider before getting a bike loan
A two-wheeler loan is a great way to finance your dream bike without paying the full amount upfront. However, before applying for a bike loan, you must assess these primary factors:
Check your eligibility criteria
Before applying for a bike loan, it is important to check if you are eligible. The eligibility criteria vary from lender to lender. Still, in most cases, you need to be above 21 years of age, have a steady source of income, and be a resident of the country where the loan is being taken. Some lenders also require a minimum credit score to qualify for a loan.
The table below highlights the eligibility criteria set by most bike loan lenders in India:
| Parameters | Criteria |
| Age |
|
| Credit score | Good CIBIL score, ideally 750 and above |
| Income requirements | Must be working for at least one year (if salaried). Or, must have IT returns of at least 2 years (if self-employed). |
| Residential status | The applicant must be a resident of India. |
Evaluate your credit score
Your credit score is one of the most important factors lenders consider when evaluating your loan application. The credit score is an indicator of your creditworthiness. It is granted by a credit rating agency, which assesses you on the basis of various factors, such as your repayment history and the number of loans taken. The most widely accepted credit score in India is the one granted by CIBIL. The CIBIL score ranges from 300 to 900, where the higher the score, the better. A good credit score can help you get a loan at a lower interest rate, while a poor credit score can result in a higher interest rate or even rejection of your loan application. Therefore, evaluating your credit score before applying for a bike loan is essential. Moreover, some lending institutions require a score of at least 750 to avail a loan.
Ensure you have all necessary documents ready
Once you have checked your eligibility criteria and evaluated your credit score, it is time to prepare the required documents. Some common documents required for a bike loan include valid ID proof, proof of income, proof of address, and bank statements. Ensure all the documents are in order and up to date to avoid delays in the loan disbursal process.
The table below shows the documents most lenders require you to submit with the loan application. However, these may vary from lender to lender.
| Type of proofs | Required Documents |
| Identity proof | PAN card, Aadhaar card, voter’s ID, or driving licence |
| Address proof | Utility bills, Aadhaar card, etc. |
| Income proof | Salary slips, bank statements, audited financial statements (for self-employed) etc. |
Check for processing fees and repayment charges
Before getting a bike loan, it is important to be aware of the processing fee and other charges that come with the loan. Processing fees can be a fixed amount or percentage, ranging from 1% to 2% of the loan amount, and are usually non-refundable. Additionally, there may be other charges, such as late payment fees, pre-payment charges, and penalty charges for non-payment. Make sure to understand all the charges associated with the loan before signing on the dotted line. You must explicitly ask about these charges to your loan provider to avoid any surprises or unwanted additional charges in the future.
Compare the interest rates and the repayment period
Last but not least, it is important to compare the interest rates and repayment periods offered by different lenders before getting a two-wheeler. A lower bike loan interest rate can result in lower monthly instalments and lower total interest paid over the loan tenure. On the other hand, a longer repayment period can help reduce the monthly instalments but result in a higher total interest paid over the loan tenure.
Take the time to compare different options and choose the one that works best for your financial situation. If you are capable of repaying the loan in a shorter period, you must select an option that suits your timeline to minimise your interest burden. You must also ask your lender if any prepayment penalties are associated with your loan. In case you are able to repay your loan before the required deadline, it must not attract any additional charges.
The table below shows interest rates on bike loans from different banks:
| Banks | Interest rates (pa) | Loan amount |
| State Bank of India | 17.55% to 19.30% | Rs. 20,000 to Rs. 25 lakh |
| Punjab National Bank | 10.90% onwards | Varies |
| Axis Bank | 11% onwards | Rs. 25,000 onwards |
| Union Bank of India | 11.95% onwards | Up to Rs. 10 lakh |
| HDFC | 14.5% onwards | Varies |
| Kotak Mahindra Prime | 8.75% onwards | Up to 100% of the bike’s value |
| Bajaj Auto Finance | 8.50% onwards | Up to 95% of the bike’s value |
Getting a bike loan is a big decision and should be taken after careful consideration of all the factors mentioned above. By taking the time to evaluate your eligibility criteria, credit score, and the terms and conditions offered by different lenders, you can ensure that you get the best possible loan to finance your dream bike.
In conclusion
Purchasing a bike in India requires careful consideration of several factors before applying for a bike loan. Firstly, you must assess your financial situation and determine how much you can afford to repay every month. The bike loan interest rate, loan amount, and repayment period are also critical aspects to consider, as they determine the total cost of the loan and can affect your financial stability.
It is advisable to compare different loan options and carefully read the terms and conditions before deciding. You should also consider the reputation and financial stability of the lender and ensure that the loan agreement is transparent and fair.
Taking the time to carefully consider these factors can help you make an informed decision and choose a bike loan suitable for your financial and personal needs.
