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If you have been thinking about purchasing a bike in the near future but do not have the finances to do the same, a two wheeler loan might help. With a bike loan, you do not have to shell out your savings as you can purchase your favourite bike and pay back the loan amount via equated monthly installments.
Motorbikes are very popular among millennials especially in metro cities where they help in skipping traffic jams. Also, given the vast number of elder as well as younger millennials preferring bikes over cars, two wheeler loan has become common.
All major banks and financial institutions provide bike loans in India. India is also the home of a variety of bike manufacturing companies ranging from foreign to domestic. Due to the great demand for two wheelers, many foreign manufacturers such as Suzuki, Ducati, Yamaha, KTM, Harley-Davidson, etc. have ventured into the Indian automotive sector. A few domestic Indian companies to name include Hero, TVS, Bajaj, and Mahindra.
A developing trend has been seen in terms of electric two wheelers, these bikes run on batteries and not on diesel or petrol. They have taken an eco-friendly approach in order to curb pollution.
Another reason for the rise of two wheelers is because they are no doubt the cheapest form of transportation available in urban as well as metro India. With cost-effective loans in hand, bikes are easily available for purchase across India.
Based on the security you provide, there are two types of bike loans available in India.
Secured Bike Loan- A type of bike loan where you are required to submit an asset as a collateral or guarantee in order to secure the loan amount. These loans are easily available and come with a low rate of interest. But if you are unable to pay your loan back on time, you stand a chance to lose the asset which has been guaranteed as a security for the loan.
Unsecured Bike Loan- A type of bike loan which does not require any collaterals for the loan to be sanctioned. Such a loan comes with a higher rate of interest or a higher down payment for the bike.
You should always check which of the two loans above meet your requirements before applying for a loan.
Loan Margin- This means that the purchase amount of the two wheeler is financed up to 90% by the lending institution while the remainder 10% has to be financed by you as a down payment.
Loan Partnerships- Nowadays, due to stiff competition, every auto dealer has some sort of loan scheme or another with respect to discounts and loan offers which are generally cheaper in comparison to another. You can also avail additional benefits and freebies from the dealership.
Reduces Financial Stress- A bike loan reduces financial stress in multiple ways. You do not have to shell out your savings completely. Many dealers accept post-dated cheques for loan payback. Also, the tenure of payback is evenly scattered throughout the year.
Leverage of Annual Income- Banks and financial institutions issue loans to individuals with an annual income of ₹50000 as well. For this, you do not have to be in the taxable bracket and the long tenure of loan will not affect your existing earned income.
No Foreclosure Charges- If you have the payback capacity to clear the loan amount before the tenure ends, banks might not levy any additional foreclosure or prepayment charges. This is because bike loans do not carry high amounts in comparison to car loans.
Additional Costs- A two wheeler loan comprises of all charges including the cost of insurance cover, accessories and registration. It is always beneficial to have added security accessories and safety features for the bike.
Loan Flexibility- The tenure for a two wheeler loan payback usually ranges between 1-2 years. Such a suitable tenure allows easy payment options and the financial burden is scattered evenly throughout the tenure.
Credit Rating- A motorbike loan is an excellent opportunity to build your line of credit with respect to a CIBIL score and credit rating. This will not only establish and improve your credit history, but will allow you to take loans in the future as well.
There are two ways of applying for a two-wheeler loans, offline and online.
Steps for online application:
First, you need to select the preferred banking institutions from where you intend to avail a bike loan. You can do so by visiting the official website and comparing all the different terms and conditions associated with each loan.
Use the online EMI calculator and check the various interest rates, tenures and loan amounts.
You can check with your lender before you make the application. Post selection, submit/upload the requested application form along with the KYC documents. Every lender has a different set of document requirement.
Online application reduces additional loan processing expenses.
Post verification, the loan amount will be successfully released.
Steps for offline application:
For online application, you will have to personally visit the branch of your preferred choice of lender.
At the branch, you need to visit the auto loan department and apply for a bike loan application form.
Fill the duly signed application form and submit the same with the requested KYC documents.
Post verification, the loan amount will be successfully released.
The basic ‘know your customer’ documents required for a bike loan are:
Proof of Identity includes - PAN card, Aadhaar Card, Voter ID, Passport.
Proof of Address - Passport, Aadhaar, Electricity, Phone Bills.
Proof of Employment - Bank/Income Statements, Salary Slips, ITR, Form 16, Employment Letter.
Do I have to visit the bank to avail a two wheeler loan?
Yes, if you are applying offline, then you are required to physically visit the nearest branch of your preferred choice of lender in order to apply for a bike loan. If undertaken via online mode, you simply need to visit the website of your preferred choice of lender and submit the online application form. Recently, banks have started sending loan executives at your residence/office with your permission.
How long does it take to get a bike loan?
Once your documentation has been successfully verified, it can take a few hours to get a bike loan. Complex applications might require a bank executive to physically visit your residence address, these usually take 2-3 days.
Does the bank pay for the whole bike or scooter?
No, bank or lender does not pay for the entire purchase amount of the two wheeler. Lenders usually cover up to 90% of the loan amount while the remainder 10% is paid by you in the form of down payment.
Is it possible to pay the full loan repayment before the tenure for the loan ends?
Yes, you can pay the full loan amount before the tenure for the loan ends. When you do so, the bank might not levy any foreclosure charges on your loan application.
What is two-wheeler hypothecation?
A two-wheeler hypothecation implies that you have pledged an asset as a collateral or guarantee in the form of security for the settlement of your loan amount.
How can I cancel my two wheeler hypothecation?
You can cancel your two-wheeler hypothecation by visiting the RTO and submitting the relevant documents from the bank regarding the bike. You are required to pay a minimal fee and submit the same at the RTO. Post submission and verification, your RC book will be dispatched to your mentioned address within 7 working days.
I am 18 years old, I don't have a job, can I apply for a two-wheeler loan?
Yes, you can apply for a two-wheeler loan as long as you have a guarantor or collateral which will act as a security, in case you are unable to pay back the loan.
Do I need a guarantor?
Yes, if you are applying for an unsecured loan, it is better to have a guarantor.
Who can be the co-applicant for the loan?
Your spouse, father/mother can be successful co-applicants for a loan.