How can I get a Two Wheeler Loan at a lower interest rate?

Factors affecting two wheeler loan interest rate

Some of the factors that affect the bike loan interest rate are as follows:
 

• Income: Many lenders require you to have a minimum monthly income to qualify for the loan. Moreover, the interest rate you get offered is also affected by the stability of your income.
   
• Credit score: Credit score is a measure of your creditworthiness. It is measured and quantified by a credit rating agency. Having a decent credit score is required to get your loan approved. The higher your credit score, the better will be your loan terms. In general, having a CIBIL score of 750 is considered good.
   
• Nature of work: In general, the loan may be cheaper for someone with a regular job than someone who runs a sporadic business. The idea is to have a regular income source and job security. This way, the lender knows that you are less likely to default on future payments.
   
• Existing debt: If you are already under a large amount of debt, you may not get easy loan approval. Moreover, to minimise their own risk, lenders may charge you a higher interest rate to balance out the risk of default on payment. 
   
• Market factors: Interest rates are set by considering the forces of demand and supply. Additionally, economic factors like inflation or recession also impact banks' interest rates.

These are the major factors that affect the interest rate on a two wheeler loan. Let us now understand how you can assess these factors to get a loan with a low interest rate.

Ways to get a two-wheeler loan at a low interest rate

Getting a lower interest rate on your two wheeler loan will allow you to have more cost-effective funding for your vehicle and a lower overall burden. Here are a few things that you can do to get the best loan deal:

Build your credit score

Your credit score is assigned to you by a credit rating agency. In this process, the agency evaluates your creditworthiness by looking into your credit history, repayment patterns, total debt burden, and duration of loans taken. If you have a strong credit history, have paid your dues on time, and have a balanced credit utilisation ratio, you are likely to get a good score.

However, if you have a lower score, there are ways you can use to improve it before you apply for a bike loan. The first step is to repay your existing debt. If you have too many ongoing loans, you can consider the option of debt consolidation. This way, all your loans will be combined into one loan. With this, you will only have to track one repayment cycle and have a single interest rate to keep in mind, streamlining the monthly payments. On the other hand, if you feel the burden is significant, you can ask your lender to restructure the debt so that you can off-load some liability.

Additionally, another important factor is your credit mix. This refers to the types of loans you have, including mortgages, installment loans, and even credit cards. Managing this can go a long way. Even if you are regularly paying your monthly credit card dues, you will soon see an improvement in your credit score.

Do extensive research

There are a large number of loan options available in the market today. With multiple lenders offering different plans, it can take time to select the right one. There may be options where similar terms and benefits are offered at vastly different interest rates. This is why you must make sure you assess all relevant options carefully.

To know what is the best loan option for you, understand the amount you want to borrow. Factor in the costs of buying the two wheeler, its maintenance, repair costs, and any other additional fees. Create a repayment plan and add these payments to your budget to finalise a repayment tenure. Now, select a loan that is in line with your plan.

To compare plans, extract all their details from the lender’s website. Compare the bike loan interest rate, repayment duration, and the EMIs. To do this, you can also use an online EMI calculator. Once you have shortlisted a few plans, pick the cheapest option that helps you meet your goals.

Maintain good relations with the lender

Getting a loan from a place where you already have established a good relationship with the lenders can go a long way. For instance, you can get a two wheeler loan from your bank, where you already have a savings account. The bank will know your personal details, income, stability, and credit history. An excellent personal rapport with the lender can fetch you a low bike loan interest rate.

To maintain a good relationship, make sure you make use of the benefits and offers the banks provide. Moreover, make sure you pay all your dues, including credit card bills, on time. Being a privileged customer of the bank, they are likely to offer you a favourable deal on your bike loan.

Reduce your existing debt

By repaying the debt you already have, you lower your financial burden. This also reflects positively on your credit score. Moreover, it will increase the lender’s faith in you as a loan candidate, knowing that you have fewer obligations to focus on. Once you have reduced your liability, you can get a lower interest rate on your two wheeler loan, making it more cost-effective.

Show proof of a stable income

Having regular monthly income shows that you have a stable cash inflow, which will help you repay the instalments on time. Typically, lenders prefer salaried individuals working with a reputed firm, indicating high job security. However, presenting audited statements showing a decent financial position and regular cash flows can boost your loan request if you are self-employed.

Get co-signers for your loan

Getting a co-signer can boost your application if you have a low credit score, unstable or low income, or do not meet any particular eligibility criteria. When you get someone to co-sign your loan, make sure it is someone comfortable taking on the liability with you. If you default on payment, the co-signer might have to pitch in. This will affect their credit score too.

To get a better bike loan interest rate, choose someone with a high credit score and a reputable source of income. If they are a strong candidate, you will be able to negotiate a beneficial deal and lower the interest rate you will be charged.

Avoid applying for many loans at once

If you apply for too many loans at once, you are likely to be rejected from more than one place. This rejection can reduce your chances of securing future loans. Moreover, it shows that you are less confident about getting a loan from a single place. This can create a negative impression on your potential lender.

In conclusion

Getting a two wheeler loan can help you make the purchase of the vehicle more affordable. To make it more attractive, you can take a few steps to negotiate a lower bike loan interest rate from your lender. This includes building your credit score, having good relations, reducing existing debt, and getting a co-signer, among other ways. Make sure you undertake proper research before choosing a loan that suits your needs.