Several youngsters harbour a dream of owning and riding a bike. However, the dream often becomes difficult to achieve because of the expense involved. Since it may not always be possible to pay upfront for your dream bike, a bike loan is a great way to fund this desire. Two-wheeler loans are popular offerings by banks and NBFCs, and you can avail them based on your requirement, credit score, eligibility, and other factors.
However, getting the loan approved is just the beginning. You must also focus on its repayment and plan for it. But before we delve into the repayment of the loan, let us first check the eligibility criteria for the same:
Eligibility Criteria for Bike Loans
Despite the availability of a multitude of lenders, not all will meet your needs or offer you a loan. It is thus important to be aware of the eligibility criteria defined by the financial institution before applying to them for a two-wheeler loan.
Below are some of the most common conditions of eligibility for a bike loan:
- Age: Most financial institutions require bike loan applicants to be over 21 years old and below 60 years old.
- Residency: Only Indian residents with a permanent address in India are eligible for a two-wheeler loan in India.
- Income: The minimum income criteria varies based on the lender. However, a source of regular income is necessary to be eligible for a bike loan.
- Credit Score: Applicants with a good credit score (preferably over 650) have a higher chance of approval for their loan application. A higher score also ensures a relatively lower two wheeler loan interest rate.
- Employment: Self-employed professionals, business owners, and salaried individuals can apply for a bike loan. However, they must meet the minimum income requirements laid down by the financial institution.
Now that you know if you are eligible to get a loan, let us understand the repayment requirements.
How much do you have to repay?
The ease of repayment of a loan depends greatly on the loan amount and the applicable interest rate. You must thus carefully consider these factors to ensure that you can pay it back easily. The lender will approve the amount based on your income and credit score. Bike loan amounts generally range from Rs. 20,000 to Rs. 10,00,000, and the interest rates start from 10.90% per annum. It is wise to compare interest rates and other terms and conditions to get the most beneficial offer.
When you take the loan, you are expected to pay back the principal amount, along with the interest charged on it. The interest rate is predetermined and typically remains fixed for the loan tenure. By knowing the charges, you can calculate the monthly instalments that you must shell out to stay on track with your repayment schedule.
Repayment of a bike loan
Here are some of the key things to keep in mind about the repayment of your bike loan:
The repayment period or the loan tenure is the maximum time available to repay the loan. Tenures generally range between 12 and 60 months, and applicants can choose the time frame based on their budget and comfort. Longer tenures mean lower monthly instalments but higher total interest and higher total cost of the loan. It is thus important to keep your repayment capacity in mind before deciding on the loan tenure.
Repayment modes for two-wheeler loans
A two-wheeler loan allows you to repay in easy instalments. You can do that through cash, cheque, demand draft, or direct debit from your bank account through ECS. Choose a repayment mode that is convenient for you and ensures timely EMI payments. Delays in payments will attract penalties and also affect your credit score.
Early repayment of bike loan
Sometimes, you may want to repay and close the loan before the end of the loan tenure. This will attract prepayment/ foreclose charges based on the terms decided by the lender. A common mistake that borrowers commit is to check these charges only when they wish to foreclose the loan. This can significantly affect the total cost of the loan, which is why it is imperative to check and compare these charges before opting for a loan. Some financial institutions may offer zero prepayment penalties or partial prepayment options, and it is wise to choose them.
Inability to repay bike loan in time
Failure to repay the loan according to the terms and conditions in the loan contract can lead to unpleasant consequences. These include a negative impact on credit score, penalties, bike seizure, or legal action. It is thus important to take your budget into account before finalising a loan and to be disciplined with your monthly instalments.
Your new bike is a joy to behold. It is thus important to be careful and disciplined with loan repayment. Carefully consider the loan tenure and amount before signing the contract. Be mindful of your repayment ability to avoid any stressful consequences later.