The excitement of purchasing a new bike is unmatched. People no longer need to wait and save money when planning to buy a motorcycle. With a loan, they can quickly secure bike finance and cover up to 95% of the bike’s cost. Therefore, a bike loan is the most convenient funding option to finance the purchase without exhausting your savings. However, you cannot grab the first loan deal coming your way. Comparing the loan plans and securing the best deal is essential to saving money and having a smooth borrowing experience.
Here are the top five tips for securing the best bike finance deals.
Understanding What a Bike Loan is
Financial institutions like Hero FinCorp offer Two wheeler Loans to individuals planning to purchase a bike or scooter. The loan finances up to 95% of the vehicle’s cost, allowing borrowers to repay the borrowed amount with interest in fixed monthly instalments. The loan amount and interest rate may vary based on the lender’s policies and the applicant’s eligibility and creditworthiness. The better the applicant’s repayment capacity, the better the loan deal they can secure.
Tips to Grab the Best Loan Deal
When looking for a bike loan, follow these tips to grab the best loan deal with the lowest bike loan interest rate:
1. Compare Various Deals
Interest rates and other terms and conditions may differ between loan companies. So, before accepting a loan offer, shop around and compare the available loan plans. When comparing loan deals, look into their interest rates, repayment terms, processing charges, foreclosure charges, pre-payment fees, customer service, etc. Getting an idea of these parameters helps compare the loan plans and secure the best deal suitable to your requirements, budget, and repayment capacity.
2. Maintain a Decent Credit Score
Maintaining a decent credit score is one of the best ways to get a lower interest rate on your bike loan. A high credit score indicates responsible credit behaviour and high repayment capacity, improving your chances of fetching the lowest bike loan interest rate. The credit score plays a crucial role in impacting your loan amount, interest rate, and repayment terms. Moreover, it gives you more power to negotiate with lenders for a better loan deal.
If you have other loans to repay and use a credit card, always pay your dues and bills on time to build a consistent repayment history. Don’t let your payments be late, even by a few days. It can harm your credit record and increase the risk for the lender. As a result, they feel convinced to charge you with a higher interest rate to cover their risk. On the contrary, a decent credit score assures the lenders of your creditworthiness, reducing their credit risk and attracting a lower interest rate. Always check your credit score before applying for bike finance and take corrective measures to meet the lender’s criteria.
3. Opt for a Shorter Repayment Term
Firstly, choose a lender that allows you to select your EMIs and repayment terms suitable to your financial capabilities. While many lending institutions offer flexible terms for loan repayment, the tenure you choose largely impacts your interest rate. Opting for a shorter tenure means the lender will get their money back sooner, reducing risk and encouraging them to offer you a better bike loan interest rate. Moreover, while your monthly instalment amount will increase, it will considerably decrease your total interest outgo by the loan term completion.
4. Look for a Lender with Simple Eligibility Criteria
To qualify for a bike loan and get the best deal, you must meet the lender’s eligibility criteria. For instance, Hero FinCorp has a simple bike loan eligibility criterion that most loan seekers can easily fulfil. You must meet the following conditions to obtain a bike loan from the loan company:
- Indian citizenship
- Age at least 18 years
- Both salaried and self-employed individuals are eligible
- Work experience: At least six months with the current employer for salaried individuals and at least one year in the current business for self-employed individuals.
- Minimum monthly income of Rs 10,000
5. Check for Special Offers
Many lending institutions run festive discounts on bike loans. Leveraging them allows you to unlock various benefits, such as discounted interest rates, pre-approved loan offers, zero processing fees, zero down payment, etc. Some loan providers also offer lower interest rates than others to attract customers during the festive season.
When seeking bike finance, check if the bike manufacturer or dealer has tie-ups with a loan company. Often, finance companies have tie-ups with bike manufacturers to offer exclusive loan deals at low interest rates. When planning to purchase a bike, check any running offers at the time or wait for their announcement if the loan requirement is not urgent.
Mistakes to Avoid When Applying for a Bike Loan
Avoid these mistakes when applying for a Two-wheeler Loan:
- Over-Borrowing: Borrowing more than you need or can afford is a major mistake to avoid. Consider your finances and calculate your EMI affordability before opting for a loan scheme.
- Opting for the Highest LTV Ratio: While lenders like Hero FinCorp finance up to 95% of the bike’s cost, you should try to borrow a minimum by making a bigger down payment.
- Not Having a Solid Repayment Plan: Borrowing a loan without a solid repayment plan is a big mistake. Set a budget, prioritise loan repayments, and make extra payments whenever possible to reduce the debt burden and catch up.
- Choosing an Inappropriate Loan Term: A longer term reduces the EMI amount but increases the interest outgo, while a shorter term increases the EMI amount but decreases the interest outgo. A Bike Loan EMI Calculator helps calculate the EMIs for various loan terms and choose one according to your repayment capacity.
Bike finance is a great way to purchase a new bike. Follow these tips and avoid these common mistakes to ensure getting the best loan deal possible without any surprises. While taking a loan is a significant decision, you must approach it cautiously rather than jumping at the first loan offer you receive. Compare loan options and research to save money in the long run.
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