Two Wheeler Loan

What is a Two-Wheeler Loan?

A two-wheeler loan is a form of a secured loan that is given by a bank or an NBFC (Non-Banking Financial Company) to an individual to help him/her buy a bike or a scooter when he/she does not have enough funds to buy the same. This can help the individual with transportation to get through the city traffic with ease. Bikes and scooters are costly and so it is generally very hard for a person to pay the entire amount in one shot especially if one has other financial obligations for the month. So, a two-wheeler loan goes easy on the pocket as one can pay EMIs (Equated Monthly Instalments) on a monthly basis and repay the loan over a period of time.

Features and benefits of a Two-Wheeler Loan

• Full financing of vehicle

Most banks and Non-Banking Financial Companies (NBFCs) finance up to 100% of the two-wheelers on-road price. In some cases, the registration and the insurance charges are also covered by the loan amount. This makes it very convenient for the customer as his savings do not get affected in one shot.

• Flexible tenures

Two-wheeler loans generally have tenures that can extend up to 4 years. In some cases, tenures of up to 5 years is also possible. This lowers the cost of the EMIs that are paid by the individual, thereby making it affordable and repayable. The preferred tenure can be chosen by the customer based on financial needs and requirements.

• Simple documentation

Most two-wheeler loans have very minimal documentation that needs to be done by the customer. ID proof, address proof and income proof are the only documents that are commonly asked for. This makes the process very easy and fast. This makes a two-wheeler loan very convenient to apply for a customer.

• Speedy disbursal

Most lenders who provide two-wheeler loans ensure that the loan amount is in your bank account in 3 working days or sooner. Pre-approved loans are available for existing customers of the bank and these are disbursed even quicker.

• Showroom and lender tie-ups

Most two-wheeler showrooms have tie-ups with certain banks for two-wheeler loans and these loans can be applied for from the showroom itself, thereby making it very easy for the customer to buy the vehicle.

Interest rates

Since a two-wheeler loan is a secured loan, the interest rates are generally low. The interest rate on a two-wheeler loan begin at just 9% and can go upwards depending on one’s credit profile, relationship with the bank and other factors.

Factors that affect interest rates for a Two-Wheeler Loan

• Credit score:

If you have a good credit score that is above 750, then the interest rates for your two-wheeler loan will be low. A credit score is a three-digit number that ranges from 300 to 900. It acts as evidence for your creditworthiness to your lender. Lenders use your credit score to assess your reliability. So, if you have a low credit score, then your lender will consider you to be a risky customer and will increase the interest rate for the loan or reject your loan application. Always ensure that you check your credit score before applying for a two-wheeler loan.

• Credit history:

If you have a long credit history that is good, then the interest rates from your lender for your two-wheeler loan will be lower than if you have a short credit history or a bad credit history. This is because your lender will view your past transactions with your past credit products to check your creditworthiness and your reliability. If you have a positive and long credit history, the banks will consider you to be reliable and will lend to you at lower interest rates. If you have a bad credit history, the interest rates will be higher as you will be viewed as a risky customer.

• Income and job stability:

The higher your income, the lower the interest rate for the two-wheeler loan. This is because the lender considers you reliable and can judge that you can repay the loan without any monetary problems. Also, if you provide proof of regular income, then your interest rate will be lower as the lender can assess your potential to repay the loan without defaulting on payments. Also, a job with a reputed company that is listed with the bank can act as an added advantage to get a lower interest rate for the two-wheeler loan.

• Relationship with lender:

If you have a good and healthy relationship with the lender you are borrowing from and are an existing customer with them, then the interest rates can be negotiated for and one can get a lower interest rate. This can help you lower the interest rates on your two-wheeler loan. Most lenders aim to please their customers and so they can lower the interest rates if you have a positive and long relationship with them.

Eligibility criteria for Two-Wheeler Loans

• Must be a minimum of 18 to 21 years of age and a maximum of 60 years of age.
• Must be a salaried employee or a self-employed individual
• Must have a good credit score and a good credit history
• Must have a regular monthly income
• Must have a good relationship with the bank

This can change based on the bank/lender you are borrowing from. Do check your eligibility with the bank before applying.

Documents needed for Two-Wheeler Loans

• ID proof (Aadhar card, Driving licence or Passport)
• Address proof (Aadhar card, Driving licence, Passport, Voter’s ID or Electricity Bill)
• Passport size photograph
• Bank statement for about 6 months
• Income proof (Pay slips)
• PAN card
• Form 16 (For self-employed individuals)
• Income Tax Returns (For self-employed individuals)

These documents may vary slightly from lender to lender and so it is best to check the documents needed with the bank you are borrowing the two-wheeler loan from.

How to apply for a Two-Wheeler Loan

• You can apply online by filling in the application form and turning in all the required documents.
• You can apply in person by visiting the lender’s branch with all the needed documents and filling out the application form for the same.

Two Wheeler Loan FAQs