Buying a motorcycle has become extremely simple nowadays as there are many lenders who offer them. Information about a two-wheeler loan is also easily available online through the lender’s website.
However, opting for a bike loan is a serious decision. You must consider a few points before you make the loan application –
- Bike hypothecation to lender:
They are secured loans. This means that the two-wheeler you purchase is actually owned by the lender till the time it gets repaid. It means the lender’s name appears as the owner in the motorcycle registration certificate. The lender’s name also appears in insurance documents. This is to give them first right over any proceeds in case of accident.
A secured loan also means that in case of default on the part of the borrower, the lender can repossess the two-wheeler and dispose it off to recover loan instalments. However, this is the last resort and lenders only do that after all other communication with the borrower has failed. Precisely why it is preferable to communicate your correct address to the lender to receive notices.
- Loan amount:
When you opt for a two-wheeler loan, an important thing to remember is that the lender does not finance the entire cost of the loan. It only covers around 65 per cent to 80 per cent of the on-road price. The on-road price means the cost of the vehicle at the dealer’s showroom plus any road tax that must be paid. Any amount over and above must be covered by the borrower out of the pocket. This is called Loan to Value which means the percentage of the loan to the value of the asset. There are calculators that help to calculate the ratio on lender websites.
- Loan tenure:
Some lenders have a fixed repayment tenure. Others do not have any fixed guidelines and allows the borrowers to make a choice about the loan tenure. Generally, the repayment tenure ranges between three to 10 years. Deciding the term is an important decision that you need to take because it affects the total amount you pay to the lender. The longer loan tenure, the smaller instalment amount and vice versa. A loan calculator assists in finding the loan amount must be repaid.
- Loan eligibility:
Each lender has their eligibility criteria in place which are typically listed on the website. Before you make a loan application, check and make sure you meet them. If you do not meet the eligibility criteria, consider making a joint application so that your application has higher chances of getting approved.
- Credit score:
Your ratings are an important consideration that lenders check when they assess your loan application. When you make an online bike loan application, the lenders make a hard request for your credit information. Your credit report includes information like previous loan applications, loan repayment, repayment of credit card debt etc.
