Everything you want to know about a two wheeler loan

Posted by neha sharma on May 27th, 2019

Getting your dream two wheeler is not that far away. You can opt for a two wheeler loan and buy the bike that you’ve always wanted. Before you apply for bike loan, here are some things you need to know and consider about this type of loan:

1. It is a secured loan:

A two wheeler loan is a secured loan. This means the two wheeler is hypothecated to the lender till the time the loan is completely paid off. Even though you’re allowed to use the two wheeler, the lender can repossess the vehicle and dispose it off in case of default in paying installments.

One important thing to remember is that since the two wheeler is hypothecated to the lender, the lender’s name appears as the owner in the registration certificate and insurance papers. After complete repayment of the loan, it is important to get a fresh registration certificate with the names changed so that there are no problems in the future, especially for insurance purposes.

2. Loan to Value:

This means the value of the asset that is given out as a loan. When it comes to a bike loan, between 70% to 80% of the ex showroom price of the bike is given out as a loan. The remaining amount has to be paid by the buyer at the time of purchase. The loan amount is directly paid to the dealer.

3. Short repayment tenure:

A bike loan generally has a repayment tenure of between 3 to 5 years. The tenure usually depends on the borrower and can be fixed by the borrower at the time of signing the loan agreement.

4. Depends on the two wheeler:

The value of the two wheeler loan is based on the ex showroom price of the two wheeler. This depends on the make or the company, the model number, the engine variant which play a part in determining the total cost.

5. Bike loan interest rate:

The interest rate on such loans depends on a few factors:

• Income of the borrower
• Outstanding loans
• Repayment capacity

In case of higher disposable income, it is possible to negotiate with the lender for more favourable terms. Generally, the bike loan interest rate ranges between 9% to 20%.

6. EMI calculator:

It is not necessary to wait till the loan is sanctioned to find out the monthly payouts associated with the bike loan. Each lender has a two wheeler loan EMI calculator on their website available for free for their users. This calculator can be used to find out the monthly installment amount and even the borrower’s eligibility for the loan. It is recommended to use a bike loan calculator to find out the EMI and plan finances before making a loan application.