You can get an automobile or scooter by taking out a loan for a two-wheeler when you are salaried or self-employed. It allows you to buy a second-hand vehicle without thinking about the whole cost in one go. The borrower must pay back the amount and the interest by combining monthly instalments or EMIs.
Banks approve the loan based on the price of the two-wheeler and the EMI you can pay. The amount of interest on your EMI decreases with each monthly payment.
According to a report, the Indian two-wheeler lending market is expected to grow from $7.2 billion by 2020 to $12.3 billion in 2025. It’s an increase that is 11% for five years. Two-wheeler loans are popular among Generation Z, or people born after 1995. The industry estimates show that most two-wheelers have been financed, compared to only 30% over the last decade. The forecast predicts more people getting on two-wheelers with loans.
Eligibility for a loan on a two-wheeler
Banks require an age minimum of 21 years old when applying for a loan with a two-wheeler. The loan must be repaid before 60 years. The banks allow you to pay back the loan before the age of 65 when you are self-employed.
Maintain a steady job for at least one year before you apply to borrow. It is helpful to have lived at home you currently reside for at least one year. You must be operating in the same business line for at least one year when you are self-employed.
It would help if you had a high CIBIL score between 700 and 750 before applying for the loan. Your lender may require a minimum income of between 72,000 to 1.5 lakh per year. The amount varies between financial institutions and banks.
The documents needed to obtain a loan for a two-wheeler
Banks and financial institutions will request certain records to process the loan request. You need to provide an authentic self-attested copy PAN Card as identity proof. A self-attested copy of the Passport and the Voter ID serves as a valid address document.
Keep track of your pay slips and bank statements from the last three months. Your bank may request an original copy of your latest income tax return (ITR). Keep a collection of passport-sized photos, and remember to fill out the application form.
The banks will request additional documents if you’re self-employed. You must submit your company’s balance sheet and profits and loss statements. Offering your income tax returns for the two most recent years is mandatory. Banks assess the viability of your business before approving the two-wheeler loans.
Two-wheeler loan features
- Many banks will finance 90%-95% of the price for the 2-wheeler. The rest of the amount and pay your downpayment.
- Banks have an interest rate which ranges between 9.5%-17 per cent per year.
- The two-wheeler loan is within five years.
- Check the processing fees before taking out the loan for two wheels. The prices range between 0.25%-5 per cent on the amount of the loan. Banks set the maximum and minimum limits on fees.
- Two-wheeler loans if already a bank customer.
- Make sure your bank offers specific EMI plans for quick instalments.
- Banks give a staggering 0.5 per cent discount for female customers.
- Your bank might have a direct relationship with an agent.
- Applying for the loan online and submitting the required documents is possible.
Benefits of a loan for two wheels
- You can pick the right motorcycle. Banks can finance the entire price of your two-wheeler’s on-road cost.
- Save your cash to use in an emergency rather than buy a bicycle. Get a two-wheeler loan, and pay it back with easy instalments over time.
- You can earn an excellent credit score through timely repayment of your loan. This will allow you to get higher interest rates on loans in the future.
- Banks will accept two-wheeler loans even if you have a lower income.
- The bank has a lower interest rate when compared with personal loans.
- Tax benefits are available by obtaining a loan to purchase an electric motorbike from an institution of finance. This tax-deductible can be up to 1.5 lakh per year on interest under Section 80EEB under the Income Tax Act. The bank has to approve the loan from April 1st 2019, through March 31st 2023.
How to get a loan for a two-wheeler
Step 1: Select one of the banks or NBFCs where you’ll take out the two-wheeler loan. You can search for an online loan that allows the bank to send an executive directly to your door.
Step 2: Verify your eligibility before applying for the loan with two wheels. Know the required documents before approaching the bank to request the loan.
Step 3: need to calculate the EMI of a two-wheeler with the help of an online two-wheeler loans calculator. It gives you an idea of the EMI you will pay. The amount of EMI will depend on the loan amount, the interest rate, and the duration.
Step 4: Provide your essential documents, such as identification, proof of address, and bank statement. The bank will check if everything is okay and determine if you qualify for the loan. The loan amount is then transferred to the account of your banking institution.