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17 Sep
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The Basics of Bike Finance

India's working class expends a significant part of their income and time for travelling to and fro from work. As per a recent research report, on average, an individual would spend around 6% of his/her income on daily work related travel. In 2008, the average time spent by people travelling to or returning from work was over 45 minutes. This number has only increased since then. That's where a two-wheeler can be a godsend. Commuting on a bike or scooter can help significantly reduce the time involved; which implies that you can spend a more time with your family. In fact, if you work in sales or marketing, a two-wheeler would enable you to visit more clients, and provide a chance to better your earning potential.

While buying a two-wheeler makes a whole lot of sense in terms of saving time and money, people are often confused whether to buy it outright, or go for financing?

Common wisdom suggests that buying anything outright through a single, one-time payment is not only hassle-free; it's also the cheapest option in terms of overall pricing. Additionally, you don't have worry about paperwork, interest rates, or anything of that sort. However, a few simple steps and you could actually benefit through financing, especially in the long term, as there are a few very valid tangible benefits:

  1. A two wheeler loan is a relatively smaller amount loan, making it easier to pay-off and give a boost to your credit worthiness, more so if you've never taken any loan before. These loans are easier to get, repay and help build a positive financial history (only if you pay all your EMI's on time).  Thereby making you a little more attractive for banks and financiers, in case you plan to take a bigger loan in the future for puchasing a car/ home or for your business.

  2. Taking a loan inadvertently encourages you to manage your finances better. Even though you'll not be making a single large payment as you'll be paying your monthly EMI's. The fact that there's a fixed monthly obligation, however small it might be. Makes you more careful and prudent while spending money.

  3. The financing option also opens up a wider range of two wheelers (motorcycles & scooters) from different price segments to choose from. You can even buy a fancier pair of wheels as the monthly EMI differential would not be very high. An outright purchase has a fixed budget, and it may limit your choices, but financing allows you to stretch and evaluate from a wider range.

 

The usual features of a two-wheeler loan

Getting a two-wheeler loan is similar to getting any other loan for any other product. You need to fulfill the documentation, age (usually adults above 18), and required income criteria. A few things to keep in mind before applying:

  1. You need an identity and address proof, such as an Aadhaar card, passport, PAN card, etc. and valid income proofs for the past six months. Most financial institutions approve a two-wheeler loan within 2 business days, which makes the process quick and hassle free.

  2. The loan is available for salaried as well as self-employed individuals, with multiple repayment options. You need to be a salaried employee for at least 6 months, or should be running your own business for at least one year.

  3. Two-wheeler loans come with flexible repayment tenures. In fact, you can repay them in as little as 6 months.

  4. There are Non-Banking Finance Companies operating in this segment, such as Hero FinCorp, which offer great service, attractive interest rates and flexible repayment options.

 

Things to know before getting your two-wheeler loan

Hypothecation - Two-wheeler loans are secured loans, i.e. the two wheeler being purchased is hypothecated in the name of the Finance Company. In case you fail to repay your EMI's then in that case they shall have the right to reposes the vehicle and recover their costs.

Duration of the loan - The loan duration, can be as short as 6 months. The term period of a loan does not affect the interest rate. However, it does affect your monthly EMI payments. Thus, for shorter periods, you will be paying a higher amount each month. However, with longer periods, you will need to pay more overall for the exact same product. When deciding on the duration of a loan, do take into account your regular living expenses. For example, if your monthly expenses are INR 15,000 and you have a salary of INR 30,000. That leaves you with Rs 15,000 for savings and making EMI payments. Ideally, you should keep the EMIs at INR 10,000 or lower. That way, you'll be able to save some amount for emergencies as well.

Beware of attractive super low interest rates - Many times, lenders will advertise super-attractive two-wheeler loan rates. However, that does not imply you will get the exact offer. Lenders have an obligation to offer the advertised rate to only 51% of their customers. Read your loan offer carefully before you sign on the dotted line.

More importantly though, when you are looking to purchase a bike on EMI, do not settle for what the dealer offers. Shop around and look for the best offer that you can get. We recommend, that you choose a reputed lender who has robust processes and can get you the loan in a quick, easy and transparent manner.

 

If you would like to know more about bike finance or the application process or anything else related to two-wheeler loans. Please feel free to drop us a line or leave your comments below!

Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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