Bikes sell more in India than cars. The reasons why people choose a bike over a car are simple – they are cheap to own and maintain.
In this context, one should remember that the prices of bikes are not what they used to be. Since 2019, bike brands in India have hiked the prices of their bikes by several folds. This led to a situation where no one is able to buy a bike with cash anymore. Anyone willing to buy a bike is doing so via bike loans.
Are there any benefits associated with buying a bike with a loan instead of cash?
Yes, there are a myriad of benefits in store for people who are purchasing motorcycles via bike loans. When a person buys a bike with cash then they are breaking out their FDs or exhausting their emergency savings. With the help of a bike loan, a person can keep their emergency cash reserves intact.
Furthermore, when a person repays a bike loan through EMIs, their credit history and score get a boost.
What about hefty interest rates?
Well, there is a solution to keep bike loan interest rates low. All one would need to do is follow the tips mentioned below –
The amount of money that the borrower wants on loan should be low
One must remember that the amount borrowed from the lender directly influences the rate of interest for the same. Hence, one must pay 80 per cent of the bike’s MSRP as a downpayment. The remaining 20 per cent should be borrowed from a lender. Also, one must refrain from 0 down payment loans. As they come with sky-high interest rates!
The tenure period selected by the borrower for the bike loan short
The tenure or the duration of the loan also dictates the interest rate of the same. The tenure is generally calculated in months, if not years. To enjoy low motorcycle loan interest rates, one should apply for a short tenure.
Although, it is best to remember that a short tenure will come with hefty EMIs. This might add to the financial burdens of the borrower. Hence, finding the right balance between tenure and EMI is crucial. Prioritising only on keeping motorcycle loan interest rates low is not a smart move!
The credit score of the borrower should be high
Experts advise borrowers to make sure their credit score is always above the 750 mark.
Well, borrowers with high credit scores will be able to enjoy low interest rates on motorcycle loans.
The overall credit history of the borrower should be clean
Borrowers who do not have any ongoing loans during the motorcycle loan application process. Or, borrowers who have never defaulted on an EMI will be offered low interest rates.
The borrower’s monthly or annual income should be adequate to justify the loan
The annual or monthly income of the borrower also dictates the interest rates offered by lenders for a motorcycle loan.
The nature of the borrower’s source of income also determines the interest rate
In case the borrower is a self-employed individual with a strong bank balance then they can enjoy low interest rates. If the borrower is a farmer or a government employee then the interest rates will go down further. On the other hand, self-employed people with insufficient funds in their bank accounts will have to pay high interest rates.
The financial statement(s) of the borrower should boost confidence in the lender
It is no news that lenders will cross check the borrower’s financial records. If the borrower has enough funds in their bank account then low interest rates will be offered by the lender.
The number of EMIs should be low
The number of EMIs or Equated Monthly Instalments selected for the bike loan also determines the interest rate. One should remember that many EMIs will lead to high interest rates. A few EMIs for a bike loan will lead to low interest rates for the motorcycle loan.
If one meets the unique criteria of lenders then they can enjoy low interest rates on a bike loan. It is as simple as that!