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Factors to look out for while choosing interest rate of a two-wheeler loan:

Significance of the Two-wheeler Loan

Two-wheelers are the common mode of transport among every people in India.  The two-wheelers are the most desired mode of transportation for most of the people because of their economic nature. They are very cost-effective when compared with other modes of transport as they save time and money. Owning a two-wheeler is a dream for everyone, but the price of the bike puts a halt to their desire. With the two-wheeler loans, purchasing a two-wheeler is now made easy and affordable for every individual.  Every financial institution offers various finance schemes to make the availing of two-wheeler loans for the purchase of bikes beneficial.

In most cases, the financial institutions offer 100% financing for purchase of two-wheeler using the two-wheeler loan. These two-wheeler loans are very affordable with interest rates and repayment tenure.  Two-wheeler loans also come with certain factors that will influence the interest rates, and it varies from one financial lender to another. The rate of interest also varies with every individual as the loan amount, repayment tenure, and income criteria play a role in determining it.

Interest rates are the rate at which one will make the repayment for every month as an EMI. It is highly important to decide the interest rate at which one will avail the loan as it will depend on the financial capability of the individual. It is essential to ensure that an individual gets a lower interest rate for the two-wheeler loan availed. Here is a set of factors that will affect the interest rate of a bike loan. They are,

Factors Influencing the Two-wheeler loan

  • Total Income- When an individual avails for a two-wheeler loan, one has to qualify or be eligible to avail the loan. The financial institutions will look for the income criteria in the individual to analyse the financial capability to make loan repayments. The income criteria for availing a bike loan is low, and this will enable many low-income individuals to get the benefit of availing a bike loan. When the income of the individual is higher, then the individual can avail a loan with a lower interest rate as higher-income will ensure a lower default risk.
  • The reputation of Employment- The lender will look at the stability in the employment of the individual. The financial lender will insist on the employer records and standards to understand the employment stability of the individual. The individual must be employed at a reputed firm or a government sector when being a salaried employee. The individual must be doing a business that is steady and runs profitable when being self-employed. Steady income influences the interest rate as lenders will trust the financial capacity of the individual. When the lender is very satisfied with the employment of the individual, there are more chances of availing a low-interest rate for the two-wheeler loan availed.
  • Payment of other loans- The financial institutions will always look at the other loan payments being made by the individual. The other loans, such as home loans or any other personal loans, which is repaid by the individual, will be monitored. This will give them clarity on the income that will be left to make the repayment for the loan. The individual must have a higher disposable income level as it will ensure a better ability to make repayment for the loan availed. This will ensure that the lender charges a lower interest rate.
  • Credit score- The credit score of the individual will play a vital role in receiving a lower interest rate for the two-wheeler loan availed. The credit score is the measurement of the ability to make the repayment for the loan. Credit history will prove the creditworthiness of the individual to the lender. It will improve the chances of having the loan approved when the individual makes proper repayments for the loans and monthly EMIs, and the credit history will get enhanced. It will help in availing loans at lower interest rates.
  • Repayment history- The history of repayment will be a major criterion for fixing the interest rate for a loan by the lender. The willingness to make payment will be gauged from the repayment of past loan history. The lender will analyse the repayment history and check if the individual makes timely payments for the loan availed previously. It is essential to make loan repayments on time and EMI payments on time. The lender will reward you with a low-interest rate when your repayment interest is trustworthy.
  • Down payment- when the individual makes a higher down payment for the two-wheeler, the lower will be the amount for the loan and lower will be the interest rate for repayment of the loan availed. It is always advisable to make more down payments for the purchase of the bike as it lessens the burden of loan repayment.
  • With collateral- In secured two-wheeler loans, the bike serves as the collateral, and the lender offers the loan with a low-interest rate as there is security with collateral. The two-wheeler loan availed with security gives the lender proof of security for loan repayment in case of default. This will enable the individual to bargain for a very low-interest rate.
  • Relationship with the lender- The relationship between the lender and individual will decide on the capacity to negotiate or bargain for lower interest rates. The past relationship with a financial lender in terms of repayments, EMIs, and other loan payments will help the individual to bargain.
  • Term of the loan- The tenure of the loan for which the individual makes the repayment has a relationship with interest rate. When the tenure of the loan is more, the lower will be the interest rate. It is important to choose a tenure of two years for the loan availed as it will be ideal.
  • Type of two-wheeler purchased- The interest rate for the loan will depend on the type of two-wheeler that is purchased. Every two-wheeler is priced at a different rate, and it will reflect on the loan amount borrowed and also the interest rate for the loan availed. The interest will vary with the purchase of mopeds and geared two-wheelers.

Significance of Interest rates

 The interest rates being charged on the two-wheeler loans always vary with one aspect to another. It is based on certain factors discussed above, which reflect on the interest rate for the loan availed. It is necessary to analyse the factors before planning for the loan. It is a commitment which an individual makes for the period of the loan availed. The individual must look at the financial market to see for the best features and benefits for the two-wheeler loan.

It is advisable to choose the loan based on requirements as it will make It beneficial. The interest rates vary with one lender to another and from one individual to another. The two-wheeler purchased, the category of applicant, income range, and the tenure of the loan availed will influence the interest rate. One can analyse the financial capability of the individual and then apply for the loan. Two-wheeler loans are offered in secured as well as unsecured form. Secured loans come with collateral, and unsecured loans do not have any collateral. Lenders will give offers for the secured loans as it gives them a sense of security. It is also an excellent option to compare and analyse the interest rates in the market as many lenders now come up with attractive offers. The reason why interest rates are essential is that they will decide on the EMI amount to be paid every month for the loan.


The individual must be careful with these factors as they will determine the rest of the loan repayment with factors such as EMIs and financial budget for every month. With a proper understanding of these factors, one can avail of two-wheeler loans with attractive interest rates.


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