Do you want to purchase your dream bike but are unsure about how to arrange for funds? Keep your worries aside. With two-wheeler loans, you can raise funds to realise your dream of owning a bike.

Here are five things to consider before applying for a two-wheeler loan to ensure you get the best deal possible.

Conduct research
Different financial institutions have different loan terms and conditions. Also, the interest rate, maximum loan amount, and loan to value (LTV) ratio differs from one financial institution to another. While applying for a loan, be prepared to pay for various charges attached with two-wheeler finance such as processing fees.

Check for the hidden clauses with different lenders as they can affect your loan application form. With good research, you may even find a financial institution that charges minimum or no fees for processing of a loan or part prepayment of a loan.

Loan amount
Many financial institutions offer loans to value on a bike for a maximum of 90% to 95%. The LTV ratio depends upon factors such as the type of two-wheeler and the applicant’s profile.

Compare the LTV ratio and loan amount offered by different lenders. You do not want to be in a situation where your chosen bike’s worth is Rs 1,00,000 and the lender offers a maximum amount of Rs 20,000. So, select one that disburses a loan amount that is appropriate for your needs. When selecting a financial institution, the loan amount should never be over-leveraged. You may find yourself in a scenario where the eligible loan amount is greater than your needs. In such cases, the lender may urge you to buy a more expensive bike by opting for a higher loan amount. Going above your budget, on the other hand, can hurt you financially in the long term. You may find it difficult to pay off your monthly EMI resulting in a dent in your credit history.

Affordable interest rate
Financial institutions determine the loan eligibility and two-wheeler loan interest rate based on factors such as the applicant’s income, age, employment status and credit history. You do not always require a strong credit history for your two-wheeler loan approval but strong creditworthiness will help you in availing of two-wheeler finance at an affordable interest rate.

Also compare the Annual Percentage Rate (APR) with different financial institutions as it includes the costs and expenses involved in getting two-wheeler finance. Therefore, it is advisable to choose a financial institution that offers a two-wheeler loan at an affordable rate of interest.

Special offers
Most financial institutions launch attractive loan offers during the festive season. Some even provide seasonal offers such as a monsoon sale. These offers may include a lower rate of interest, zero down payment, 100% financing, zero processing fees, and such. Furthermore, if you are an existing customer, there are good chances that it may offer you better loan interest rates as compared to new customers. If you avail of a two-wheeler loan during a special offer period, you may save a large amount of money on your EMI throughout the loan repayment tenure.

Repayment options
Check the repayment options available with different lenders. Longer the tenure, the higher will be the interest component. Choosing a plan with flexible loan EMIs will allow you to repay the loan quickly while ensuring that you never miss an EMI payment.

Source: Tax Guru