About Bike Loans:
Whether you are buying an entry level Scooty Pep+, or a Royal Enfield Bullet with a 350cc engine, you would probably have to opt for a Bike loan. Some of the luckier people who do have the finances to buy it without loan also might consider two wheeler loans because they are easy to have approved and have monthly Installments that are overwhelming. For the rest of the majority of the prospective two wheeler users loans are perhaps the perfect idea.
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Also, considering that a lot of families are going nuclear bikes are more preferable and economic. The other observation that has been noticed is the rise in the youth demographic in India (18 to 25 years), forming a majority of motorcycle buyers in India. To make this seem like a cake walk, we give you the various aspects of a two wheeler loans, starting from industry specifics of the vehicle in India to the requisites and frequently asked questions about this vehicle finance product.
Two Wheeler Industry in India (as of. August, 2016)
The two wheeler industry in India is said to be one of the largest of its kind in the World. Whether it is due to the fact that bikes are the cheapest form of personal transport or the large urban middle income demographic in the country, this motor industry is booming. However, entry level two wheelers, which starts from INR 40,000 in India has slown down by some margins the overall industry is on the rise. The partial reason for the growth is due to fact that, today two wheeler loans are easily accessible to Indians, as numerous banks are offering, a variety of options.
A few more things that one would be interested to know when buying a two wheeler include:
- Indian Two wheeler Heavy Weights Domestically Also in the International Market: Hero MotoCorp had a whopping market share of over 41% from Y-2013 to Y-2014 and still holds the maximum share in the two wheeler industry in India. Some of their popular foreign markets include Africa and Sri Lanka.
- Future Potential for Industry: In August 2016, Mahindra Group announced invested a lumpsum on their two wheeler division of INR 500 crores. This is despite running at a loss, in the industry despite of ad campaigns and other investments in their 7 years of existence. It shows how the company does still see potential in this sector and is willing to invest. Currently, they have an ambitious target of selling 30,000 to 35,000 units each year.
- Foreign Investments in India: There are also foreign investors who do find India, one of the most lucrative two wheeler market. For example, US-based UM Motorcycles launched their cruiser range of motorcycles in association with Lohia Auto in India. This is not all. Suzuki has also has set a target of selling at least 10,000 units of Gixxers in this fiscal year alone.
Why Opt For a Bike Loan?
Considering the rising number of private cars in the urban regions in India, one might think that, rural area transportation may have similar trends. The truth is that the majority of the rural demographic can afford a two wheeler, mainly due to the availability of loans to buy the same. But the convenience of bikes are not the only factors that make these loans a popular finance product in India:
- Two wheelers have a better resale value in the long run against cars and hence once your loan repayments are made, you can think of a new vehicle already.
- A lot of people in India have the money to buy an entry-level motorcycle or scooter at one-go. But this would cause much distress, in terms of finances for the family. Also a part of the lump sum that they have can be used to save or even invest in other investment products such as mutual funds, fixed deposits or even buy Two Wheeler Insurance. In other words, it helps to ease of the burden of buying a vehicle in a single month.
- A lot of people cannot afford to buy a vehicle unless allowed to pay installments and the majority of buyers fall in this demographic. Also, they have much lower maintenance costs than four-wheelers. The mileage or fuel consumption is also better making it a more convenient buy.
- The Indian loan market has a lot of options in the form of banks to choose from with competitive interest rates and even throwing in combos for loans and insurance packages taken together. Some even come with the advantage of paying through post-dated cheques.
Types of TWO Wheeler Loan:
There are 2 types of Bike loans available in India, based on the security of the loan:
- Secured Bike loans: You generally take these loans against a security or collateral that may be an asset, such as home, bonds, lands, etc. While these loans are easily available and have comparatively lower interest rates than unsecured loans, they also carry the risk of losing your asset, in case you are unable to successfully pay off your loan amount.
- Unsecured Bike loans: At first this may seem quite lucrative, consider they require no collaterals to be declared for loan sanction, but it eventually makes pay a much higher price for vehicle than you should have paid, if you had taken a secured loan. But first time buyers. Sometimes a secured loan is not a possibility. Hence, this type of loans is the only option that remains.
However, if one has the liberty, they should choose their loan type based on their priorities, both current and long-term.
How to avail two wheeler loans?
A two wheeler loan can be availed in two different ways:
Features of 2 Wheeler Loans:
There are numerous reasons and benefits of a two wheeler loan, but there are some that stand out. It has mostly to do directly with the financing aspect of it but still is highly valuable to most customers, if they are aware of it. Read on to know the major features that you should look out for in your choice of two wheeler loan:
- Margin of Finance: On an average, most 2 wheeler loans will pay for up to 90% margin of finance. This means that you can make a loan downpayment of only 10%, which is measely considering the prices of an average tw-wheeler.
- Loan Partnerships with Dealers: Auto-financiers often have special deals with with motorcycle and scooter dealerships to provide convenient loans, which often prove to be cheaper than the ones, if opted separately. Also, as a buyer, you can negotiate freebies and added benefits if the bike or scooter dealership offers you the same.
- Relieving Financial Burden: The most beneficial feature is the fact that it helps spread the costs into a yearly loan that will last, based on your requirements, never to be responsible to give you a tough time when it comes to financing it. Some companies also take post-dated cheques for loan repayments, which is also convenient for many.
- Annual Income Leverage: Banks often offer these loans to people who are earning as low as INR 50,000 in a year. This means that you do not even have to be in the taxable bracket to get these loans and at the same time you can still afford it. Since, the loan repayment tenure can go upto 4 years, you monthly installments will not affect your income as such as long as you have that in your mind, in your monthly budget.
- No prepayment or early foreclosure charges: Most banks do not charge any prepayment charges if you are able to pay up your loaned amount before your tenure ends. This is often suitable for some, because it helps to clear off your debts faster, if you can. At the same time, banks know that two wheeler loans do not have very high loan amounts and hence charge nominally and sometimes do not charge anything at all.
- Other Costs Covered: These loans often cover the costs of accessories, insurance and even registration. This means that you are getting finance for not only the vehicle but the essential expenses on the same. It is a good idea to add security accessories and make the most of this opportunity, since the premiums also are made lower if you have extra security and safety features in the vehicle.
- Flexibility in loan Tenure: Loans provide borrowers with ample time to pay back for the 2 wheeler loan with tenures that range between 12 to 48 months. A longer tenure helps to manage an individual's monthly fiance better and at the same time avoid defaulting payments.
- Credit Score: As a first time vehicle buyer or opting for a loan for the first time, motorcycle loans are a great idea to open your file for your credit score since not only will this be a fast loan to repay but will not affect your credit score with lower chances of defaulting the loan repayments.
Eligibility Criteria for Two Wheeler Loans:
Banks will not give you loans for your vehicle, on your face value. Infact today the banks are extremely careful about making sure that their customers are able to pay up their loans, considering the rising debt rate among youngsters, in India. So, they have a general set of eligibility criteria set, among which the following are the most important to cover:
- Age: Generally, for two wheeler loans, the banks allow a ripe age of 18 years as the minimum acceptable age for a loan application in India. This is not only because of the factor of reyment capacity, but also the fact that many students use bikes as their form of commute to their institute or college. Some banks may require the applicant to be at least 21 years, too. The maximum age for loan application is generally around 65 years for most banks.
- Employment: This is is absolutely essential because banks sanction your loan application based on the fact that you are a salaried individual or at least self-employed, involved in some sort of business or have a source of regular income.
- Employment Tenure: Now there are banks that offer special loans to students who are not employed yet, with a system that works similar to an education loan, but if you are applying as non-student, some banks may want to check your stability of income by requiring you to have worked with your current employer for at least 6 months.
- Minimum income: The minimum income requirement is really low for 2 wheeler loans and if you are living in urban areas and salaried, it would not need much trouble to cover for. However, it is always a good idea to check for the same because often the minimum income may be based on the loan amount.
- Residential Requisite: Banks often require that an individual stay in a singular home as sign of stability in address for loan sanction because to avoid loan defaulters who change their residence often.
- Permanent Numbers: Some banks may require to provide a permanent land line number, where they can get in touch with you, whether it is your residence or your office landline.
- Credit Score and Ratings: For those who are just starting off their financial portfolio, this loan is a very good path to start with. However, if you already have a credit history, make sure it is good. The most accepted credit score, by banks, that is considered is CIBIL score. This should be be at least 750 to give the loan company, the confidence to help you seek finance for the vehicle. Also, most unsecured loans require you to have a positive CIBIL score, which is not hard to get as long as your bill payments are made and you have a healthy credit history.
- Documentation: To prove the above, you are required to furnish some documents, which are comparatively lower for two wheelers, when compared with other loan products. Read the next section to know more.
Documentation Required for Bike Loan Applications:
It is essential to remember that with every eligibility criterion that needs to be covered, comes the requirement to prove it to the bank through documentation. Based on these, the following are the most basic documentations that may be required to be submitted along with your loan application to ensure positive results on the loan loan approval:
- Photo Identity Proof: passport size photographs, at least 2 to 6 are recommended to be kept handy for your loan application.
- ID Proof: This not only helps to prove your age, but also works as an alternate document as your address proof. Whatever, you submit as the address proof will be compared with the ID proof. This may be any of the following documents:
- Driving License
- Voter ID card
- Aadhar Card
- PAN Card
- Address Proof: There are two types of address proof that you may need to submit based on your current resident. The first one is your permanent address proof and the second is your current address proof. While another ID proof other than PAN Card can be your permanent address proof, your temporary address proof should be any bills that you pay against your name. Some banks ask for multiple bills as current address proof.
- Employment Proof: There are multiple documents that may be required for this. Generally, it includes your employment or offer letter, salary slips and bank's statements. For people who are self-employed will have to furnish bank statements and their source of income. Also, the latest Form 16 will be required to be furnished.
Note, that you will need both the the originals and the copies, for loan applications, hence keep both at an arm's distance.
Two Wheeler Loan Interest Rates:
Two wheeler interest rates are variable, based on the bank as well as a range of other factors such as your chosen tenure, your credit report and even the vehicle you have chosen to buy. The rates generally vary between a minimum of 11% to 18.25% (as of August, 2016). However, it is essential to understand that sometimes an 11% interest rate may be deceiving with a very high processing fee, which we will come too later. Hence, do not be bought instantly by just the interest rate figure appealing to you. It is a must to consider the other charges and fees levied for a loan for your two wheeler loan as well.
Fees and Charges Applicable on Two wheeler Loans:
People when opting for a two wheeler loan have the major requirement of ensuring that they do not pay a lot more than the actual price of the product in the end. To avoid this, people generally consider interest rates. However, low interest rates may not be sufficient to note. There are other factors that need a close consideration which includes:
- Processing Fee: Processing fees are charged for processing the request for the loan and is mandatory in most banks. They are also, generally calculated in percentages of the total loan amount. It is also essential to note that this fees is non-refundable under any given situation. The amount charged for it varies from bank to bank but ignoring this number often leads to people paying excess for their loan.
- Prepayment Fees: This is is charged under the circumstance where people are able to pay the repayments earlier than due and sometimes even pay the remaining loan amount earlier. For bike loans this charge is generally very low and sometimes even non-existent.
- Late-payment Fees: As the name suggests, this fees can be easily avoided, with a little bit of planning. The borrower is generally charged this when crossing the due date for loan repayment, generally is a genuine result of financial crunch or lack of funds. However, banks charge a fee regardless the circumstances.
- Charges for Conversion: If you wish to change your two wheeler loan from a floating rate calculation to a fixed rate or vice versa, this fees is charged. This is basically a charge for switching, based on your requirements. In other words, it is a flexibility fee.
- Copy of an Account Statement: Sometimes people may require a statement for their current statement for the loan. While most banks do not charge for getting you a copy of the same, there might be a few banks which may levy a nominal charge for a hard copy of the same.
- Administrative Fee: This is often a very deceiving name for this fee because it is often confused with processing charges. This charge takes care of the administrative cost to the bank for processing your loan, which are not part of the processing fees.
Online Application for Bike Loans:
You do not have to run to the bank for weeks to get a loan sanctioned anymore. Instead have soft copies of all the documents required stored in your system. Go online, compare your options, choose one that offers you to apply online and Razmataz!!! Your loan application is submitted with soft copies of all your documents in very little time. While some banks might even send you a representative to pick up your documents incase you do not have soft copies, some banks take little time for processing a bike finance.
Once the loan is sanctioned, you will receive the amount and you are ready to buy your new vehicle. Sounds almost as easy as getting a dealership loan offer? Sometimes, it is actually easier to deal with than a showroom loan plan. The best part is that you are able to go through all the details of the loan terms and conditions so that you are aware of the commitment you are getting into when buying a two wheeler.
Tops Banks Offering Motorcycle Loans in India:
While this may seem like a cake walk for most, a lot of people end up paying more than they can chew for a two wheeler in India, if they do not take the adequate loan for the purpose. Banks offer you a lot of benefits and really low interest rates for such loans in India, including both private and public sector banks. But the main issue, regardless the bank you choose is the question often ignored by most: Is this the best deal that I can procure for my new vehicle?
While some may finance a bike a mean of regular commute, others may buy even a second-hand Yezdi for the thrill for it, In India. Regardless the requirements, the most important thing to note is the affordability. While most top loans for two wheelers are highly affordable, it is never a bad idea to make sure that you have the best deal in terms of benefits both basic and added. So, check for all the features and benefits mentioned here and much more if you can.
Points To Remember Before You Get a Bike Loan:
We are not calling this section, tips since all these points must be kept in mind when buying a bike mainly because of the fact that when you are buying something as important as a vehicle you need to be aware of both your rights as well as commitments. So, here is what you need to keep in mind:
- Perfect Your Credit History: Starting with your CIBIL score to the last mobile post-paid bill payment, today is the time for you to make amends in your credit history if you want to get a two wheeler loan at reasonable interest rates. You need to understand that most loan companies are slowly getting access to you full financial profile, allowing them to judge as a customer who will keep to the loan repayment commitments.
- Research for the best offer: While your dealership may offer you high on flexibility, on your vehicle loan, it is essential that you scrutinize other options as well. Compare each product's and look through the various fees and charges, along with the interest rates. Check the features and benefits as well and then decide.
- Go Through the Product Disclosure Sheet/ Terms and Conditions/ Product Brochure: Before you actually apply, the last thing that you may often forget is to check their terms and conditions, etc with proper product details. If you are unsure about any information or it seems misleading, contact the bank immediately to clarify.
- Analyse Your interest Rates: You can use a two wheeler loan EMI calculator to give you an approximate idea about how much you actually owe ultimately. You should also note other things such as whether it is a fixed or floating rate, different base rates, etc. Every bank has a different way of calculation, with different numbers and this needs to be understood well by you.
- Fees and Charges: As repeatedly mentioned, do not ignore these numbers and amounts if you see a pleasing interest rate for your two wheeler loan.
- Documentation: Have all your documentation ready, because once you are sure about a loan product, you can instantly apply online or at the dealership.
FAQs on Bike Loans:
- Do I need to visit the bank to avail a two wheeler loan?
Absolutely not. In fact, in the case of a dealership, the showroom will take care of the things related to the loan sometimes with a representative from the bank available in the showroom. Else, you can apply online. While some loans require soft copies of documentation, others will simply send a bank representative to collect the documentation and even discuss the product with you.
- When do I know that it is the right time to apply for a two wheeler loan?
The only way you can find it out is by calculating your finances, both currently and for the future. Use an EMI calculator to do so and get an estimated number in your head for monthly repayments. Once you think you can afford it, nothing should stop you, unless you have a terrible credit history.
- Will the bank pay for the whole bike or scooter?
Different banks offer different margins of finance. While some may offer you only 80% margin, do not be surprised when you get 90% covered as well. It is essential to note that most top banks will offer you the full cost of your new vehicle, including other costs such as insurance and accessories.
- Is it essential to take a personal accident insurance when riding a two wheeler?
Absolutely yes, since riding a two wheeler has a lot in stake against riding a closed four-wheeler.
- Can I pay the full loan repayment, before the tenure for the loan ends?
Yes, sure you can. You might be charged a nominal pre-payment charge for the same.
- Will I be allowed to choose between MLCR and base rates?
The bank's terms and conditions on the same actually, rule over that. However, different banks will give you different numbers, resulting differently. So, to be absolutely sure, refer to their product brochure or literature.
- What is 2 wheeler hypothecation?
Hypothecation is a process of guaranteeing possessions as a security/ collateral for the settlement of your loan. In other words, it is an entitlement against the pledged asset as a security of a debt in a contract between you and the bank.
- How to cancel my two wheeler hypothecation?
The steps for two wheeler hypothecation, are as follows:
- Once your loan is completely repaid, keep the receipt as a proof.
- You will be given two forms of Form 35 from the lender (bank) and fill them up duly as directed.
- Get a postal cover and put a 12 rupee stamp on it. Remember to put your name and contact details on it.
- You will be levied INR 100 as the processing fee for HP termination. Now get the receipt after disbursement.
- Attach your bike's original RC book, copy of your insurance document and duplicate copy of valid pollution under control certificate along with the aforementioned postal cover and submit it to the Regional Transport Office.
- You will get a receipt from the RTO as a proof of your submission.
- You will be sent the RC book by speed post in less than a week.
- Please keep the copy of all the original papers that you have sent.
- Will I be allowed to switch from a floating rate to a fixed rate of interest or the other way round for my two wheeler loan?
Yes, some banks make it possible to do so. But, they also charge a conversion rate for the same. This fee can be looked up for each product, at the fees and charges sections.
- If I am 18 years old, but I don't have a job yet, can I apply for a two wheeler loan?
Yes, some banks may allow you to do so, as long as you have a collateral or a guarantor to support you in the case, you are unable to make loan repayments on time. As a student, you can apply for loans, but note that they are treated as special cases and are completely at the bank's discretion.
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