Is your dream bike still a dream because you are struggling to find a way to finance it? One of the best options is to take out a bike loan. Purchasing a motorcycle can be a significant investment, and finding the right financing option can make all the difference for you to enjoy it without draining your finances. A bike loan with a high-interest rate can put an additional financial strain on you. Fortunately, a bike loan at a lower interest rate is possible, and there are several steps you can take to secure it.
Before understanding how to get a lower interest rate, let us compare some of the recent bike loan interest rates charged by banks and NBFCs.
Bike loan interest rates
The table below highlights the bike loan interest rates charged by different lenders.
|Bike loan||Interest rates||Tenure|
|Bajaj Auto Finance||8.50% p.a onwards||Up to 48 months|
|IDFC First Bank||6.50% to 33% p.a||6 to 48 months|
|HDFC Bank||8.50 to 25.91% p.a||12 to 36 months|
|Bank of Baroda||9.40% to 13.65% pa||12 to 60 months|
|Axis Bank||16.50% to 24.00% pa||12 to 48 months|
Tips to get a bike loan at a lower interest rate
Here are some tips to help you get a bike loan at a lower interest rate.
Extensive research for competitive interest rates
When researching bike loan interest rates, look beyond the interest rate advertised on a lender’s website. Contact the lender for a personalised interest rate quote based on your credit score and other factors. You may also want to consider working with a loan broker who can help you compare rates from multiple lenders.
Choose a shorter tenure
When choosing a tenure for your bike loan, consider your monthly budget and overall financial goals. While a shorter tenure may not directly result in a lower interest rate, it will allow you to save money by lowering your overall interest burden, as it is calculated for the entire period till your loan is repaid. You may want to use an online bike loan emi calculator to compare your costs for different tenures.
Make a higher down payment
Making a larger down payment can lead to a lower interest rate by decreasing the principal amount you need to borrow. Lenders typically consider borrowers who make a larger down payment less risky because they appear to be already highly invested in the purchase.
Seek pre-approved loans
Pre-approved loans generally come with lower interest rates. When applying for a pre-approved loan, it’s essential to provide the lender with precise details about your income, employment, and credit history. It will help to guarantee that the lender can provide you with a reliable estimate of the interest rate for your bike loan.
Clear your existing debts
Paying off your existing debts can help improve your credit score and debt-to-income ratio, which can impact the interest rate you are offered on a bike loan. Be sure to make all of your payments on time and pay down any high-interest debts first.
Maintain a good credit score
Your creditworthiness plays a significant role in determining the interest rate you will be offered for a bike loan. It’s important that you build a good credit score by paying your bills promptly, minimising your credit utilisation, and refraining from submitting numerous applications for new credit simultaneously. A healthy credit history translates into a higher score.
Improve your debt-to-income ratio
Your debt-to-income ratio reflects the amount of debt you have in relation to your income. Lenders usually prefer a lower ratio as it suggests a lower-risk borrower. To improve the ratio, prioritise repaying your current debts and steer clear of taking on new ones.
Establish a good relationship with the lender
Building a relationship with your lender can help you get a lower bike loan interest rate. Consider working with a local bank that you can visit in person. Or you can choose a bank where you already have a savings account since they will be aware of your personal details, income, credit history, etc. Be sure to make all of your payments on time and inform your lender of any changes in your financial situation.
Get co-signers for your loan
A co-signer with a stable income and good credit score can help you qualify for a bike loan at a lower interest rate. However, remember that your co-signer is also responsible for repaying the loan if you cannot. It will affect their credit score as well. Make sure it is someone who is aware of this condition and is willing to take on the liability with you.
Avoid applying for several loans at once
Each time you apply for a loan, the lender will perform a hard credit inquiry, which can negatively impact your credit score. Avoid applying for multiple loans at once and instead focus on improving your credit score and debt-to-income ratio before applying. You are likely to be rejected by more lenders, decreasing your chances of securing a loan in the future.
Why are lower interest rates important?
Obtaining a bike loan at a lower interest rate is beneficial in more ways than one. Firstly, it lowers the monthly interest payments, making the loan more affordable and easier to manage. It is especially important for those with a tight budget or limited income. A lower monthly payment means less financial stress and the ability to pay off the loan on time. This also translates to higher expendable money over the month that you could use for investments or other needs.
Secondly, a lower interest rate reduces the total amount of interest paid over the life of the loan. It translates to significant savings in the long run and allows for faster repayment. It is because a larger portion of the monthly payment goes toward the principal amount rather than the interest.
Thirdly, since you can repay the bike loan faster with a lower interest rate, it improves your credit score. A good credit score is essential for obtaining other loans in the future. A lower interest rate also provides more flexibility regarding the repayment period. You can choose a longer repayment period with lower monthly payments or a shorter repayment period with higher monthly payments. It allows you to tailor the loan to your specific financial situation.
Lastly, the money saved on interest payments can be used for other financial goals, such as savings, investments, or paying off other debts. Therefore, obtaining a bike loan at a lower interest rate is financially beneficial and provides peace of mind and increased financial flexibility.
Getting a bike loan at a lower interest rate requires some effort and research, but it is achievable. By improving your credit score, comparing offers from different lenders, negotiating terms, and considering alternatives such as secured loans, you can save a significant amount of money in interest charges over the life of your loan. With some planning and strategy, you can enjoy the thrill of riding your new bike without burning a hole in your pocket.
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