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Understanding Two-Wheeler Loans: A Complete Guide

October 16, 2024

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In India, it's safe to say two-wheelers have secured their place as a favourite vehicle of choice when it comes to every day commute. They offer exceptional maneuverability, making them ideal for navigating through narrow lanes and busy streets, saving considerable commute time.

Though affordable than cars, making a down payment upfront while purchasing a two-wheeler may not be a viable option for many. This is where availing a two-wheeler loan could help. In this comprehensive guide, we have explored everything you need to know about two-wheeler loans.

What is a TwoWheeler Loan?

A two-wheeler loan is a type of loan that's specifically designed for purchasing scooters, motorcycles or any other two-wheeler vehicles. They typically cover a significant portion of the vehicles cost, subject to terms and conditions, which the borrower repays (along with the applicable interest) via EMIs (Equated Monthly Instalments) over a pre-determined period.

Features of Two-Wheeler Loans

Competitive Interest Rates

Compared to personal loans, two-wheeler loans offer competitive interest rates. The rate offered varies across banks and depends on the customer's credit profile and other parameters (we have explained this later, read on!).

Flexible Repayment Tenure

Typically, two-wheeler loan repayment tenure varies between 12 months and 48 months. However, banks may review customer profile before deciding on a particular tenure.

Adequate Funding

Banks like Ujjivan SFB offers financing of up to 95% of the vehicle's on-road price, subject to terms and conditions. Please note that the final amount offered is at the sole discretion of the bank. For the remaining 5%, you can open a Fixed Deposit or Recurring Deposit. Both these accounts can help you meet your short-term goals. However, plan the same in advance to avail liquidity benefits.

Minimal Documentation

Most banks ask for basic KYC documents like PAN, Aadhaar, driving license, Voter ID, etc., to process two-wheeler loans. However, check with your bank to see if any additional documents are required.

Secured Loan

Two-wheeler loans are secured loans, meaning you have to pledge the two-wheeler as collateral to avail the loan.

Should I opt for Personal Loan or Two-Wheeler Loan?

The choice between a personal loan and two-wheeler loan depends on your specific needs. If your sole intention is to purchase a two-wheeler, availing a vehicle loan would be more apt. That's because two-wheeler loans offer lower interest rates compared to personal loans. However, if you plan to use funds for other purchases too, personal loan might be more suitable.

Point to Note: You cannot use two-wheeler loan for any other financial requirement. It's designed only for two-wheeler purchase.

Eligibility Criteria for Two-Wheeler Loans

Nationality: Resident Indian
Age: 18 years to 59 years
Type of Employment: Salaried or Self-employed

The eligibility criteria mentioned here is generic; check with your bank for better clarity.

Things to Remember Before Applying for a Two-Wheeler Loan

1. Credit Score

This is exactly what we were referring to as 'other parameters'. It's important to check your credit score before applying for a loan. A good credit score could help you fetch better interest rate on your loan. If your score is low, work on improving it before applying to avoid your application getting rejected.

2. Keep a Check on Your EMI

Compare your two-wheeler loan EMI with the help of two-wheeler loan EMI calculator. Enter the loan amount, tenure and interest rate to check your repayment obligations. This will help you manage your finances better.

3. Decide on the Loan Amount

Determine the amount you need for purchasing two-wheeler. This may help you choose a loan that fits your budget and repayment capacity.

4. Take Note of Additional Fees and Charges

Understand the processing fees, prepayment/pre-closure charges, late payment fees and other associated costs. This will help you plan your loan better.

5. Loan Repayment Schedule

Review the repayment schedule and take note of your repayment obligations to ensure you can comfortable manage your EMIs.

6. Loan Tenure

Decide on a loan tenure that suits your financial situation. Longer tenures reduce monthly instalments but increase overall interest costs.

Final Thoughts

If you want to purchase a two-wheeler of your choice but are short on funds, you may consider opting for two-wheeler financing. However, ensure not to miss any repayments to keep your credit score healthy.

Planning to buy a two-wheeler? Apply for Ujjivan SFB Two-Wheeler Loan and enjoy minimal documentation, competitive interest rates, higher loan amount, and more!

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FAQs

1. What is the interest rate for bike loans?

The interest rate for motorcycle loans can vary depending on the lender and your creditworthiness. Ujjivan SFB offers competitive interest rates ranging from 20% to 26% p.a.

2. Can I pre-close my loan?

Yes, you can pre-close your loan, subject to terms and conditions. For example, Ujjivan SFB charges 2% of the outstanding principal amount plus GST for early closure of two-wheeler loan.

3. What documents are required for a two-wheeler loan application?

The documents required may vary between lenders, but some common documents include identity proof, address proof, income proof, and bank statements.

4. Can I apply for two-wheeler financing online?

Yes, many lenders allow you to apply for two-wheeler financing online through their website or mobile app.

5. What is the loan amount range for a two-wheeler loan?

You can get up to 95% financing on the on-road price of the vehicle.

6. What is the loan tenure for two-wheeler financing?

The loan tenure can range from 12 to 48 months.

7. Are there any processing fees for a two-wheeler loan?

Yes, additional charges may include processing fees, CERSAI charges, pre-closures charges, etc. Kindly check with your bank for better clarity.

8. What happens if I miss my two-wheeler loan EMI?

Missing EMI can affect your credit score. Also, defaulting on the loan can result in seizure of the vehicle by the concerned bank. This is because your two-wheeler serves as collateral while availing the loan.