Tips To Choose The Best Bike Loan Interest Rates
Majority of Indians prefer owning a bike over a car.
Why?
Well, cars are costly to own and bikes are not. That said, bike OEMs are increasing the MSRPs of bikes in India incessantly. So does this mean that the sales of motorcycles in India are dwindling?
Not at all and the reason is the availability of bike loans from numerous lenders in India.
There is a catch though.
If loan applicants are not careful enough then they might end up adding the bike loan to their financial worries.
How?
Well, in form of high interest rates.
How can loan applicants keep bike loan interest rates low?
That is easy.
All one would need to do is learn about the factors that lenders refer to while setting interest rates for a bike loan.
What are those factors?
They are as follows –
The credit score of the loan applicant
Bike loan interest rate directly depends on the credit score and credit history of the loan applicant.
If the credit score of the loan applicant is below average or poor, some lenders might reject the loan application. However, some lenders would approve the loan but they would charge hefty EMIs and interest rates. Furthermore, if the credit history of the loan applicant is riddled with red flags then interest rates will be high.
Red flags in the credit history of a person appear when the loan applicant defaults on a loan. Loan defaults can be intentional or accidental. In both cases, loan defaults result in the reduction of credit scores and the development of bad credit history.
In the eyes of lenders, a loan applicant with a poor credit score and red-flag riddled credit history is a liability. Since lenders have set up shop to earn money, they prefer not to take unnecessary risks. Hence, they would either reject an application from an applicant with a poor credit score or credit history. Or, they might approve the loan but charge hefty EMIs and interest rates.
The solution to this predicament is simple.
Loan applicants should make sure that their credit score is optimal and their credit history is spotless. It is one of the many ways to keep loan interest rates affordable.
The down payment made by the loan applicant
Some lenders are ready to bear 80 – 90% of a bike’s upfront cost. Then there are 0 downpayment loans where the loan applicant would not need to pay a penny as a down payment. In both cases the EMIs and the interest rate on the bike loan will be exorbitant, to state the least.
As per experts, a loan applicant should pay at least 20% to 30% as a down payment. The remaining costs should be taken care of by applying for a bike loan. In this way, the subsequent EMIs and the rate of interest charged by the lender will be affordable.
The source of income of the loan applicant
When a person apply for a bike loan online, they need to disclose their exact mode of income. This information allows the lender to determine the interest rate on the bike loan. For example, salaried individuals can get low interest rates whereas businesspersons might need to bear expensive interest rates.
The place of residence of the loan applicant
Interest rates charged by lenders on the bike loan schemes they offer also depend on the city.
For example, if the loan applicant is a Mumbai resident then they might need to pay a high interest rate. On the other hand, a Gangtok resident might need to bear a low interest rate.
Standard of living can also play a role in this matter. Lenders run extensive background checks on loan applicants. If research reveals that the applicant has the means to lead a lavish life then lenders might charge high interest rates.
Conclusion
It is important to pay close attention to the factors mentioned in the above sections. Vigilance is the only solution to keep interest rates affordable. Hence, apart from following the tips mentioned above, one must also remember to choose a revered lender. Loan applicants should choose recognised lenders. Furthermore, applying for a bike loan from an extremely reputed lender is a wise decision. One must also compare loan products among lenders. This will ensure that one is choosing the loan scheme that is on par with their unique requirements. For more details, consult with an expert.
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