Check Out the Factors that Affect Bike Loan Interest rate

Bikes have come up as not only the most convenient and cost-effective mode of transportation but also as a status symbol with the variety of sports bikes and super expensive luxury bikes available to riders. Have you been planning to buy a two-wheeler for yourself but are not sure how to arrange for its financing? A bike loan is your solution to this. Let us know more about bike loans and bike loan interest rates. 

Two-wheeler/ Bike loan

A bike loan or a two-wheeler loan is a financial instrument through which you can avail a loan from a lender for buying a bike/ two-wheeler. Lenders are willing to finance 100% of the cost of the bike as a loan. 

Bike loan interest rate is usually comparatively low, making it a popular choice for prospective two-wheeler buyers. You can use various online EMI calculators available on the websites of different lenders to understand how much EMI you would have to pay on your bike loan. 

While availing of a bike loan, the interest rate at which it is available is a crucial deciding factor among various lenders. A lower interest rate means lower EMI. Thus, it is beneficial to opt for a bike loan that is available at a lower interest rate from the lender. An important question here is, what factors affect the bike loan interest rate when you are planning to buy a two-wheeler. Read on to find out the answer to this question.

Factors that Affect Bike Loan Interest rate

To select the best two-wheeler insurance policy, you need to understand the factors that affect the rate of interest at which the loan will be available to you. Check out some of the most crucial factors that affect the bike loan interest rate for a buyer:

• Net income: Net income tells the lender if you have sound enough financial standing to pay back the loan you are planning to take. This does not mean that you cannot get a bike loan if your income is low, but the interest rate will be higher in that case. This is because a higher income reduces the chance of default at a later stage. 
• Source of income: Your source of income affects the interest rate at which you get the bike loan. A salaried employee will get a loan more easily and at a lower interest rate than a self-employed individual, who will have to prove his income stability and creditworthiness from his part earning records. 
• Down payment: Down payment is the lump sum amount of money that you pay to the bike dealer at the time of purchasing the bike. This amount excludes the loan amount and is the money that you pay out of your pocket. A higher down payment eventually means a lower interest rate. Therefore, you can choose to pay a higher amount as a down payment, to lower the interest you have to pay on the loan. 
• Place of residence: A person living in a metropolitan city will have a higher living stand than a person living in a tier two city. A higher living standard needs a higher rate of earnings. The debt to income ratio is a significant factor when determining your bike insurance interest rate. 
• Model of the bike: The manufacturer, model, and type of your bike also determine the loan interest rate. Two-wheeler models that have a higher resale value are the preferred choice of lenders and attract a comparatively lower interest rate. 
• Value of loan: If you opt for an expensive bike and want a higher amount of loan on it, it is likely to attract a higher rate of interest. This is because the higher the loan offered by the lender, the higher is the risk he is taking on the money. 

With a a higher disposable income, and finer negotiation skills you can avail of a bike loan at a lower interest rate and get your favourite two-wheeler.