A bike loan provides you with various advantages to help you realise your ambition of owning a vehicle. A two-wheeler loan is easy to obtain and affordable to your pocket. If you are applying for this loan for the first time, you should first learn about the various advantages of this loan.
Features & Benefits of Bike Loans
Bike loans are one of the most cost-effective ways to finance your dream bike purchase. The two-wheeler loan interest rates are low, and it does not place a strain on your finances. Since the bike you bought is hypothecated with the lender under this sort of loan, the lender is assured of repayment. In the event that you default on your loan, the lending institution will auction your bike and recover all of their outstanding debts from the proceeds.
Simply put, the lower credit risk associated with this loan makes it one of the most affordable sources of bike financing.
2. High LTV:
What could be more annoying than having to give up on your ideal bike due to financial constraints? Nothing. But if you are buying a bike on loan, you won’t have to deal with any of these issues. Two-wheeler loans have a maximum loan-to-value (LTV) of 95%. It means that you can get your ideal bike by paying only 5% of the cost out of your own pocket.
It is all about the LTV. But at this point, you are probably thinking about how much the lender will offer in terms of value. Between Rs 10,000 to Rs 1 lakh is the answer. The money you have been granted will be sufficient enough to buy your dream bike.
3. Purchase Bike of Your Choice
One of the most appealing features of applying for a bike loan is its flexibility. You have the option of choosing from a wide range of motorcycles available on the market. Whether you want to buy a cruiser, a sports bike, or a scooter, you may do it easily with a two-wheeler loan. The lender does not impose any limitations on the sort of bike for which a loan will be granted.
4. Flexible Tenure
Another advantage of this loan is the repayment flexibility. You can pick the repayment duration based on your budget and other financial obligations. You are probably wondering how this point is useful. Right? Check the below-given table to understand.
|Parameters||1 Year Term||2 Years Term||3 Years Term||4 Years Term|
|Loan Amount||Rs 1 lakh||Rs 1 lakh||Rs 1 lakh||Rs 1 lakh|
|Rate of Interest||8%||8%||8%||8%|
|EMI||Rs. 8,699||Rs. 4,523||Rs. 3,134||Rs. 2,441|
|Interest Payable||Rs. 4,386||Rs. 8,545||Rs. 2,811||Rs. 17,182|
|Total Payable||Rs. 1,04,386||Rs. 1,08,545||Rs. 1,12,811||Rs. 1,17,182|
From the table, you can clearly take an idea of how the loan term impacts the monthly EMI and interest component. If you can afford the higher EMI, go for the shorter tenure and save a lot on the interest component. But if you have financial constraints, look for a longer tenure.
5. Retain your Saving
Purchasing a bike requires a good amount of money. You may deplete your savings or emergency reserves if you want to pay the entire sum in cash. Using up all of your emergency savings to buy a bike could leave you exposed to a crisis. This is where a bike loan comes in handy. You can choose your ideal bike without worrying about your monthly budget. And, given the low two-wheeler interest rate, this financing choice outperforms all other funding options.
6. Helps in Building your Credit History
There are a variety of financing options available on the market, but qualifying for them might be tough. The severe eligibility conditions impact your borrowing capacity the most, mainly those connected to credit history.
The two-wheeler loan eligibility requirements are kept to a minimum, and the applicant does not need to have a high-paying job to acquire this loan. You can easily qualify for this loan even if your monthly salary is between Rs 15,000 and Rs 20,000.
Once the lender has approved your application, make sure you pay your EMIs on schedule. Keeping track of your loan payments aids in the building of your credit history.
7. Tax Advantage:
Don’t get surprised to see this point here. Bike loans also come with tax benefits, though not directly and not for everyone. Only business owners or self-employed professionals can claim tax benefits on this loan.
To qualify for this advantage, business owners must buy the bike in the company’s name and claim it as a business expense. If they do so, they will be eligible for a tax deduction on the amount paid towards the two-wheeler loan interest rate.
8. Insurance Cover
A bike purchase requires funds not just for the purchase of the bike model, but also for the payment of registration and insurance fees. However, when you buy a bike on a bike loan, the lender covers the cost of insurance in the loan amount.
According to the Motor Vehicle Act it is mandatory for all financial institutions to approve a loan for the amount that includes the cost of bike insurance and accidental cover for the owner. To make this process smooth, financial institutions these days have tie-ups with several insurers.
9. Financial Discipline
The EMI of the two-wheeler loan could range anywhere from Rs 2,500 to Rs 7,000, or slightly more depending upon the bike that you have financed. However, this sum is not so large that you will have problems repaying it.
So, as you pay this amount and maintain track of your other essential expenses, you become more disciplined and concerned about striking out the needless expenses from your monthly budget list.
The advantages of taking out a bike loan are numerous. Apply for this financing right now to get started on your exhilarating trip on your dream motorcycle.