Bike Loan Interest Rate 2023

Two Wheeler Loan Interest Rate & Charges 2023

The bike loan interest rate in India usually range between 6.85% - 28.30% per annum. The following table gives- a comparison of interest rates, processing fees, prepayment, and foreclosure charges offered by various Banks and NBFC's:

*Disclaimer: Fees and charges are subject to market conditions and financial institution’s discretion.

How to Calculate Bike EMI with Two Wheeler Loan Interest Rate?

Check out the various factors that determine your two wheeler loan interest rates:

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

Here, P stands for the loan amount or principal, R is the interest rate per month and N is the number of monthly instalments. To calculate the interest rate (R), you need to input the EMI amount (EMI), principal amount (P) and number of EMIs, which is its tenure (N). Let’s understand this with the help of an example. 

Let’s assume you take a loan amount of ₹1,00,000 for a period of 12 months at a monthly EMI of ₹4,707.

When you input the information in the above equation, it will look like this:

4,707 = [1,00,000 x R x (1+R)^12]/[(1+R)^12-1]

On calculation, R will come out to be 12%.

Types of Interest Rate

The interest rates levied on bike loans come in two types.

• Fixed Interest Rate - Fixed interest rates remain constant irrespective of the market rate change. If you choose a fixed interest rate of 10%, it will remain the same till the end of the loan tenure.

• Floating Interest Rate - The floating interest rates fluctuate depending on the current market conditions. The marginal cost of a funds-based Lending Rate fluctuates with the change in repo rate. So, with time, your floating interest rate, which is linked to this rate, could change accordingly. Floating rates are comparatively lower than fixed rates. So, most of the borrowers choose floating rates for their two-wheeler loans.

Variable Interest Rate or Fixed Interest Rate - Which is Better for a Two Wheeler Loan?

Generally, fixed interest rates on two-wheeler loans are preferred by most individuals as they offer predictability and financial security. This allows you to plan your monthly budget accurately and stay on top of your EMI payments. Additionally, fixed rates can be beneficial when you foresee a rise in the interest rate in the future and you lock the current rate of interest, so you don’t have to pay a higher rate later.

While floating rates are typically set 1% to 2.5% lower than the fixed interest rate offered by the same lender, they can fluctuate abruptly, causing you to pay more than you can afford in some cases.

Tips to Avail Two Wheeler Loan at Low Interest Rate

While applying for a two wheeler loan, you will always try to get a loan with the lowest interest rate possible. Take a look at the few tips that can help you get lowest two wheeler loan interest rates:

• Good credit history - Credit score plays an important role in the bike loan interest rate you will be offered. If you don’t have a good credit, the chances to get a low loan interest rate is low. Make sure your credit history is faultless before applying for a loan.

• Good relations matter - Try taking a bike loan from the bank where you already have a savings account. If you have maintained a very good and warm relationship with them, you can get better two wheeler interest rates.

• Low debt status - Check your debt-to-income ratio before applying for a new loan. Pay off existing loans and bring down this ratio. This ratio includes the part of current income that is used for repaying credit card bills and other loans. The chances of getting good interest rates are high if you have a low ratio.

• Better negotiations - Negotiating with your bank can help you get better interest rates in situations where you don’t completely fulfil the bike loan eligibility criteria for loans.

Why Should You Compare Interest Rates Before Applying for a Two-Wheeler Loan?

When you compare two-wheeler loan interest rates offered by various lenders, you can choose a lender offering the lowest two-wheeler interest rate. Not only does it make your two-wheeler loan more affordable, but it also helps you pay your EMIs on time and avoid payment defaults.

Factors that Affect Two Wheeler Loan Interest Rate

Check out the various factors that determine your two wheeler loan interest rates:

• Annual Income: Most lenders set a minimum income limit to apply for a two wheeler loan. The higher the applicant earns, the lower risk they have of not repaying your loan. If you have a higher level of income, you may get a lower interest rate.

• Employment Type: The financial institutions offer different bike loan interest rates depending on the applicant being self-employed or salaried. Salaried individuals will be offered bike loans at a lower interest rate compared to the self-employed applicants.

• Age: The age of the applicant plays a vital role in determining the loan interest rate. If you’re nearing retirement age, you will be charged a higher interest rate because your capacity to repay a loan may be lower compared to young people.

• Credit Score: One of the most important factors that determine the two wheeler loan interest rate is the applicant’s credit score. If you have a good credit score, you may be able to get a lower interest rate, and a higher interest rate will be charged if you have a bad credit score.