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Long story short: Looking to finance your dream bike through two wheeler loan? This guide will walk you through obtaining a bike loan, making your dreams of hitting the road a reality.
In this current era, most motorcycle purchases, especially in India, are all based on loans. Yes, that is a reality. Everyone is willing to have a bike loan to fulfill their dream of getting the desired bike. A bike loan is now a norm in a motorcycle purchase. But most people do not know several aspects of bike loans, and there are several unknown things about the same. In this article, we aim to discuss topics about bike loans, ranging from documents required, things to know, misconceptions, and FAQs.
What is a two-wheeler or motorcycle loan?
A bike loan, also known as a two-wheeler loan, is a type of loan that allows individuals to finance the purchase of a motorcycle or scooter. It is a popular financing option for those who want to buy a two-wheeler but may not have the full amount available upfront.
When you take a bike loan, the lender (usually a bank or a financial institution) provides the required funds to purchase the bike. You repay the loan monthly over a specified period, including interest and sometimes other charges. The tenure of a bike loan can vary from a few months to several years, depending on the terms offered by the lender and the borrower’s preference.
How to calculate motorcycle loan in India?
Manual two wheeler loan calculation using a formula
The formula for calculating a bike loan in India typically involves using the Equated Monthly Installment (EMI) formula. The EMI is the fixed monthly amount a borrower must pay to repay the bike loan.
The formula to calculate EMI is as follows:
EMI = [P x R x (1+R)^N] / [(1+R)^N-1]
Where: EMI = Equated Monthly Installment P = Principal amount (bike loan amount) R = Monthly interest rate (annual interest rate divided by 12 and converted to decimal) N = Loan tenure in months
Automatic two wheeler loan calculation with a bike EMI calculator
Also, there are a plethora of online two-wheeler loan calculators, especially on banking websites, to check for, which will provide you approximate amount details about the same.
Documents required for a two-wheeler loan in India
Identity Proof: Any one of the following documents can be submitted as identity proof:
- Aadhar Card
- Passport
- Voter ID
- Driving License
- PAN Card
Address Proof: Any one of the following documents can be submitted as address proof:
- Aadhar Card
- Passport
- Voter ID
- Utility Bills (electricity bill, water bill, etc.)
- Ration Card
Income Proof: You must provide proof of your income to demonstrate your ability to repay the loan. The acceptable income documents include the following:
- Salary slips for the last few months
- Bank statements showing salary credits
- Income Tax Returns (ITR) for the last two to three years (for self-employed individuals)
Passport-Size Photographs: Recent passport-size photographs are required for the loan application.
Bank Statements: You may be asked to provide bank statements for the last three to six months as part of the documentation.
Form 16: If you are a salaried individual, you should submit your Form 16 as proof of income.
Proforma Invoice: A proforma invoice from the bike dealer specifying the on-road price of the bike you intend to purchase is required.
Proof of Down Payment: You must provide proof of the down payment made for the bike.
KYC Documents: You should submit Know Your Customer (KYC) documents, including self-attested copies of your PAN and Aadhar cards.
Things to check and know about bike loans in India
Loan Eligibility: Check the lender’s eligibility criteria before applying for a two-wheeler loan. Generally, lenders consider factors like age, income, employment status, credit score, and existing loan obligations.
Interest Rates: Compare the interest rates offered by various lenders. A lower interest rate will reduce the overall cost of the loan.
Loan Amount and Down Payment: Decide on the loan amount you need and the down payment you can afford. A higher down payment will lower your loan amount and subsequent EMIs.
Loan Tenure: Choose a loan tenure that suits your financial situation. Longer tenures may reduce the EMI amount but can increase the total interest paid over the loan term.
Processing Fees and Other Charges: Inquire about processing fees, administrative charges, and prepayment penalties, if any, before finalizing the loan.
Repayment Schedule: Understand the repayment schedule, including the EMI amount, due date, and modes of payment (cheque, online transfer, auto-debit, etc.).
Prepayment and Foreclosure: Check if the lender allows prepayment or foreclosure without additional charges. Prepaying the loan can help you save on interest costs.
Documentation: Prepare all the necessary documents for the loan application, such as ID proof, address proof, income proof, bank statements, and photographs.
Loan Approval Time: Enquire the time taken for loan approval and disbursal. Some lenders offer instant approval, while others may take a few days.
Credit Score: A good credit score enhances your chances of getting a favorable loan offer. Ensure you have a healthy credit history before applying.
Two-Wheeler Insurance: Most lenders require you to have comprehensive insurance coverage for the two-wheeler during the loan tenure.
Check for Offers and Discounts: Some lenders might have promotional offers or tie-ups with dealers that could provide benefits like reduced interest rates or processing fee waivers.
Loan Default Consequences: Understand the consequences of loan default, as it can negatively impact your credit score and may lead to legal actions by the lender.
Loan Agreement: Read and understand the terms and conditions mentioned in the loan agreement before signing it.
Customer Support: Choose a lender with good customer support to assist you in case of any queries or issues during your loan tenure.
Some myths & misconceptions about bike loans in India
High Down Payment Required: Many believe a bike loan requires a significant down payment. While a down payment is common, it’s not always substantial. Some lenders offer bike loans with lower down payment options, depending on the borrower’s eligibility and creditworthiness.
Lengthy Loan Approval Process: Some assume that getting a bike loan involves a lengthy and cumbersome approval process. However, with the advent of digitalization, many lenders now offer quick and seamless online loan approval, making the process relatively faster and more efficient.
Only New Bikes Can Be Financed: There’s a misconception that bike loans are only available for new motorcycles. In reality, most lenders offer loans for new and used bikes, depending on the bike’s age and condition.
Higher Interest Rates: While interest rates for bike loans can vary based on the lender, loan amount, and tenure, some believe these loans always come with high-interest rates. In truth, interest rates can be competitive, especially if you have a good credit score and choose the right lender.
No Need for Credit Check: Some believe bike loans do not require a credit check, especially for small loans. However, like any other loan, lenders assess the borrower’s creditworthiness through credit checks before approving the loan.
No Prepayment Penalty: Some bike loans may have no prepayment penalty, but not all loans follow this rule. Reviewing the loan terms and conditions to understand if prepayment is allowed without incurring additional charges is essential.
No Need for Income Proof: Another misconception is that bike loans don’t require income proof, especially for lower loan amounts. However, lenders typically require income verification to ensure the borrower can repay the loan.
Easy to Get Multiple Loans: Some assume getting multiple bike loans simultaneously is easy. In reality, multiple loan applications within a short period can negatively impact the borrower’s credit score and reduce the chances of loan approval.
Loan Approved Equals Affordability: Just because a lender approves your bike loan application doesn’t necessarily mean you can comfortably afford the loan. Borrowers must assess their capacity to repay the loan and other financial obligations.
FAQ about bike loans
Is the loan interest rate for all bikes, superbikes, and scooters the same?
No, For superbikes, the interest rate will be low compared to bikes and scooters. For scooters, it will be the highest, and bikes in between. To know the exact interest rate, contact a bank or use an online EMI calculator.
Can bike loans be used for tax exemption?
Bike loans are not tax-deductible in India for individual taxpayers. This means that the interest paid on a bike loan cannot be claimed as a deduction from taxable income while filing income tax returns.
Can we prepay a motorcycle loan?
Yes, you can prepay a bike loan in India. By prepaying the loan, you can reduce the overall interest burden and close the loan account earlier. Before deciding to prepay your bike loan, it’s essential to carefully read the terms and conditions of the loan agreement and check with your lender about any applicable prepayment charges or restrictions.
Can we close a motorcycle loan early?
Yes, you can close a bike loan in India. By closing the loan early, you can reduce the overall interest burden and close the loan account earlier.
Can I get a motorcycle loan with a bad credit score?
Getting a bike loan with a bad credit score in India can be challenging, but it’s not impossible. Some lenders may still consider providing loans to individuals with bad credit scores. Still, the terms and conditions might be less favorable than borrowers with good credit.
What is the maximum bike loan duration in India?
India’s maximum bike loan duration is 5 years. Bike loan tenure is 3-4 years normally, while we can extend loan tenure to 5 years by submitting ITR.
Which bank loan is better for bikes, private or public banks in India?
Both private and public sector banks offer bike loans, and each category has advantages and disadvantages.
Private Banks
Pros:
- Faster Loan Processing
- Personalized Services
- Attractive Offers
Cons:
- Higher interest rates
- Stringent eligibility criteria
- Limited branch network
Public Sector Banks
Pros:
- Lower interest rates
- Wide branch network
- Reliability
Cons:
- Slower loan processing
- Less personalized services
- Limited offers
Can a student get a motorcycle loan in India?
Yes, students in India can get a bike loan. Still, the eligibility criteria and terms may vary depending on the lender and the student’s circumstances. Students cannot be expected to repay two-wheeler loans in 2-3 years, so they can apply for a loan with a co-applicant or guarantor. For this reason, the minimum age to apply for a student bike loan is 18 years.
Can we get a loan for a second-hand bike in India?
Yes, you can get a loan for a second-hand bike in India. Many banks, financial institutions, and non-banking financial companies (NBFCs) offer loans for used or second-hand bikes. These are known as “used bike loans” or “pre-owned bike loans.”
What are the good and bad credit scores for a bike loan in India?
A good credit score typically falls within approximately 750 to 900 points. A fair credit score may range from around 650 to 749. A bad credit score generally falls below approximately 650.
Can a motorcycle loan be transferred from one person to another in India?
Yes, bike loans can be transferred in India, just like other types of loans. Loan transfer, also known as loan refinancing or balance transfer, allows borrowers to shift their existing bike loan from one lender to another.
Conclusion
If you have any other doubts or queries, email us at bikeleague2017@gmail.com. We are always eager to help and assist you. Also, here are several social media platforms of Bikeleague India to raise your suspicions.
