Last Updated on September 23, 2021 by Aaron Thompson
Summary: Two-wheeler loan are very popular in India. But many are unaware of what factors impact its interest rates the most. This article discusses 5 main points.
Purchasing a vehicle by paying out the entire sum of money in one go is not financially possible for most people. Due to this, many people resort to loans for convenient repayment of the vehicle. Given how popular bikes are as a form of transportation in India, bike loans are a great way of financing the purchase for people across socioeconomic strata.
Before applying for a Two-wheeler loan, one must consider who is the right lender for them. It would be best to choose the right lender based on affordability—the most important aspect of affordability when taking a bike loan is the bike loan interest rate (Click here to know latest interest rates). There are a lot of factors that influence the interest rate of a loan. Some factors have a much greater impact than other factors do. Some of the main aspects that affect the interest rates on a bike loan are as follows.
Amount of the Loan
The amount of the loan you borrow is the most integral part of a bike loan. It is the primary basis upon which other factors are based, the most important being the interest rate. A higher loan amount means a higher interest rate and vice versa.
Equated Monthly Instalments or EMIs also play a crucial role. The monthly payments through EMIs seep into the interest rate for the entire loan tenure. Many borrowers wish to know what their EMI would be like before applying for a loan. A two-wheeler loan EMI calculator is the perfect tool for this.
Using an EMI calculator can help you understand where you stand financially regarding the affordability of a loan. Furthermore, it also enables you to gauge what kinds of lenders you are on the lookout for. Hence, you can narrow down your search for a lender.
Income and Employment
Your income is a significant indicator of your repayment capacity to the lender. If the lender deems that the loan amount and tenure you have applied for are not coherent with your income, they are likely to reject the request. If your income is sufficient, you may be able to receive the loan at a better interest rate.
Tenure of the Loan
The period for which the loan has been undertaken is known as its tenure. Tenure is important as it affects the interest rate. A longer tenure equates to a rate of interest and vice-versa. Hence, making it important to select the right tenure for the loan to ensure that the interest rate caters to what you can afford.
Like your income, your credit history is also an indicator of your repayment ability to the lender. It reflects upon your history of spending, current debts, consistency in repaying prior debts, etc. If you have a low credit score, you will have to pay higher interest, or your application may be rejected altogether.
Your credit history and score need to be impeccable to receive the most competitive interest rate. Another important aspect is your bank account status. If the lenders see that you already have sufficient funds in your account, you will be granted a lower interest rate for the loan.
It can be challenging to consider every aspect that impacts your interest rate on a bike loan. The factors mentioned above outline the most significant ones to make it less overwhelming for potential borrowers. Keeping these in mind not only help you maintain realistic expectations about your loan, but you can also plan your finances better. Since loans are meant to bring you out of immediate financial turmoil, having this opportunity for financial pre-planning can be a boon for many potential borrowers.