With more than ten different motorbike manufacturers seeking your attention and even more banks ready to finance your dream with two-wheeler loans, you can now go and buy your dream motorbike. To help you choose the best offers on motorbike loans, we have come up with a fact cum cheat sheet. So read on before you sign the dotted line on your subsequent motorbike loan agreement and go driving into the sunset.
Getting a Two-Wheeler Loan – The Process
To get a two-wheeler loan, you have to:
- Be above 21 years of age,
- Have an ID proof like Aadhar card / Pan card,
- An income proof by way of ITR filed or last three months salary slips from your employer.
But if you are minor, all these documents need to be produced by your parent/guardian.
Once you submit the two-wheeler loan application along with the supporting documents to the bank, the bank officials will check your eligibility for their motorbike loan.
The two-wheeler or secured loan is always in consideration against the mortgage, i.e., the motorbike you buy is hypothecated to the bank at the RTO and gets mentioned on your RC book.
1 – Approach Your Savings Bank
To get the best offer on a two-wheeler loan, you can approach the bank in which you already have a savings account. If you have a good credit balance in the bank and have an existing relationship with even other financial instruments like FD’s, you will mostly get a good offer on your two-wheeler loan. However, you can always approach any other bank for your loan.
2 – Maintain a Good CIBIL Score
Before a bank sanctions your loan application, they always check your CIBIL (Credit Information Bureau India Limited) score that tracks your repayment history and defaults.
CIBIL score is always a 3 digit rank ranging between 300 and 900. If you have a high CIBIL score, your bank will give you the best deal on your two-wheeler loan.
A word of caution though, please don’t go and check your CIBIL score frequently. And the more you request, the lower your score will be, as CIBIL will downgrade your status.
3 – Increase Your Loan Eligibility
If you have other loans, try to reduce the principal amount by pre-paying lump sum amounts and reduce your EMI. It will help in improving your creditworthiness and get a good deal on your two-wheeler loan.
4 – Go for Nationalized PSU Banks
Interest rates of different banks are different, and a loan interest rate may vary anywhere from 9% to 22%, depending on which bank you approach. If you are very financially astute, you will know that the Nationalized PSU banks like Bank of India, State Bank of India, and Bank of Baroda have good exposure as ICICI, HDFC, and Axis private banks.
If you check these banks’ interest rates, you may conclude that PSU banks offer lower interest rates than private banks and probably save nearly Rs. 25000 to Rs.30000 annually per lakh while servicing the loan for 5 -7 years.
6 – Analyze the Total Cost of the Loan
We, as loan seekers, make the mistake of looking at the interest rate as the only criteria for securing a two-wheeler loan. But if you analyze some of the below-mentioned charges, you will get a clear picture.
Processing fee – This is a service fee banks charges to process your loan application. The processing fee varies from 2% to 3.5% of the loan amount. So if you have applied for a loan of Rs 1 lakh, you will have to pay the bank Rs. 2000 – 3500 to process your application.
Documentation charges – Again, all private banks charge a minimum of 3% service charge as a documentation fee for creating a loan account number and a file in your name to process your loan application. So you will end up paying Rs.3000 if you apply for a Rs 1 lakh two-wheeler loan.
Overdue EMI interest – If you default on your EMI with a private bank, they will charge you 2.5% per month, which comes to 30% annual. A considerable sum to pay, so don’t ever default.
Different remittance fees – Traditionally, the banks allow direct debit from your savings accounts through the NEFT mandate. If you want to change the format from ECS to Cheque, you have to pay Rs. 500
Bounced cheque / EMI return fee – If for some reason there is no sufficient balance in your bank account and your ECS call from the bank fails, you will have to pay your EMI with immediate notice plus an additional fee of Rs.500 for EMI returned.
Pre-payment charges – All banks levy a pre-payment fee, which can be from 10% of the outstanding loan amount to 3%, depending upon the year elapsed from your 1st EMI. The bank doesn’t like to part a loan taker and sacrifice their interest earnings over a longer duration of the loan spread.
So always look at all these above-mentioned hidden charges when you calculate your loan outgoings and decide on the best loan.
7– Always Take Your Time to Decide and Negotiate
While taking a two-wheeler loan, don’t be aggressive with the bank executive. Instead, ask intelligent questions and deal in a friendly manner with the executive for a better motorbike loan offer. As a thumb rule, submit your loan application at the start of the month but take your time to decide. Due to the heavy pressure of targets, executives may follow up with you daily to achieve their commission. Be polite and say you are negotiating with other banks and are getting a better deal. If you’re lucky, the bank executive will ask for a counteroffer, and you will get the deal; that you cherish. Also, be sure to negotiate on the processing and documentation fees.
8 – Look Out for Special Offers
Every Dussehra or Diwali, you will find giant advertisements from the bank on their special festive offers. Check and again analyze before you take up any of these special loan offers. Some banks club other services with these special offers on two-wheeler insurance if you opt for their two-wheeler loans and offer special cashback coupons on leading e-tailing portals like Flipkart, Amazon, or Myntra.
Thus, check all options before you finalize your two-wheeler loan, and remember the caveat to make a good decision. So if you are a true blood biker from the motorbike community and are looking to own a great pair of wheels, go ahead and book your love with the best loan from your bank.
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