5 Tips on How to Negotiate Better Terms for Your Two-Wheeler Loan

Planning to purchase your favourite bike but short on cash? Availing a two-wheeler loan may help solve the problem. With a two-wheeler loan, you don't have to break your Fixed Deposit or your Savings Account. The interest rate and financing amount for two-wheeler loans varies across banks and depends on various parameters including your creditscore, bank's interest rate policies and other terms and conditions. 

However, you can still negotiate better loan terms for your two-wheeler loan to enjoy the best deals, including but not limited to low-interest rates, minimal processing fees, and reduced foreclosure charges, among others. 

In this article, we have provided best loan agreement tips and insights on how best to negotiate two wheeler loan terms. Let's dive in! 

Tips to Negotiate Better Term For Two Wheeler Loan 

1. Shop Around and Research 

Before finalising a bike loan, it's important to do your homework and thoroughly research different banks. Take the time to compare interest rates, processing fees, foreclosure charges, and loan tenures offered by various banks. By doing so, you can identify hidden fees and avoid banks who charge unnecessary amounts. 

While interest rates play an important role in selecting a bank, it's equally important to consider other factors such as foreclosure charges and processing fees. A low-interest rate might seem attractive at first, but if the associated charges are high, it might not be the best deal for you. Therefore, make sure to compare all aspects of the loan agreement before making a decision. Just so you know, Ujjivan SFB offers affordable two-wheeler loans at competitive interest rates. You can get financing up to 95% of the on-road price of the vehicle capped at ₹2.75 lakh. 

2. Capitalise on Your Credit Score 

Your credit score plays a significant role when negotiating two-wheeler loan terms. Aim to maintain a credit score above 750 to qualify for low-interest rates. If you have a good track record of repayments and a healthy credit score, leverage this as part of your loan negotiation. 

Banks often specify the necessary credit score required to qualify for their lowest interest rates. If your credit score matches their criteria, approach them confidently for a loan. By showcasing your creditworthiness and low-risk profile, you increase your chances of securing better loan terms. 

Point to note: Two-wheeler loan is a secured loan, meaning your bike acts as a collateral till the loan is repaid. Secured loans usually don't have strict credit score check criteria.

3. Check Out Prepayment Charges 

Most banks charge a fee for prepaying your two-wheeler loan before the agreed-upon tenure. It's crucial to understand how much the bank is likely to charge you in case you decide to foreclose your loan. Negotiating the foreclosure fee can give you flexibility in managing dynamic interest rates and allow you to save on interest costs. 

For example, let's say you have a two-wheeler loan with an outstanding amount of ₹1,00,000 and an interest rate of 10%. If the foreclosure fee is 2% of the outstanding amount, you would incur a charge of ₹2,000 for prepaying the loan. By negotiating this fee or opting for a bank with lower charges, you can potentially save money when closing your loan early. 

4. Choose a Shorter Loan Tenure 

While banks may offer the option of longer loan tenures for your two-wheeler loan, it's advisable to choose a shorter tenure whenever possible. Opting for a longer tenure may seem appealing as it reduces your monthly instalment amount, but it also increases the overall interest paid over the loan term. 

5. Relationship with the Bank 

If you're a long-term customer with a particular bank, you may be eligible for deals and offers. Banks often roll out such offers exclusively to their prime customers. Such offers may include lower interest rates, reduced processing fees, higher financing amount, etc.