5 Tips on How to Negotiate Better Terms for Your Two-Wheeler Loan
December 03, 2024
Planning to purchase your favourite bike but short on cash? Availing a two-wheeler loan may help solve the problem. With a two-wheeler loan, you don't have to break your Fixed Deposit or your Savings Account. The interest rate and financing amount for two-wheeler loans varies across banks and depends on various parameters including your creditscore, bank's interest rate policies and other terms and conditions.
However, you can still negotiate better loan terms for your two-wheeler loan to enjoy the best deals, including but not limited to low-interest rates, minimal processing fees, and reduced foreclosure charges, among others.
In this article, we have provided best loan agreement tips and insights on how best to negotiate two wheeler loan terms. Let's dive in!
Tips to Negotiate Better Term For Two Wheeler Loan
1. Shop Around and Research
Before finalising a bike loan, it's important to do your homework and thoroughly research different banks. Take the time to compare interest rates, processing fees, foreclosure charges, and loan tenures offered by various banks. By doing so, you can identify hidden fees and avoid banks who charge unnecessary amounts.
While interest rates play an important role in selecting a bank, it's equally important to consider other factors such as foreclosure charges and processing fees. A low-interest rate might seem attractive at first, but if the associated charges are high, it might not be the best deal for you. Therefore, make sure to compare all aspects of the loan agreement before making a decision. Just so you know, Ujjivan SFB offers affordable two-wheeler loans at competitive interest rates. You can get financing up to 95% of the on-road price of the vehicle capped at ₹2.75 lakh.
2. Capitalise on Your Credit Score
Your credit score plays a significant role when negotiating two-wheeler loan terms. Aim to maintain a credit score above 750 to qualify for low-interest rates. If you have a good track record of repayments and a healthy credit score, leverage this as part of your loan negotiation.
Banks often specify the necessary credit score required to qualify for their lowest interest rates. If your credit score matches their criteria, approach them confidently for a loan. By showcasing your creditworthiness and low-risk profile, you increase your chances of securing better loan terms.
Point to note: Two-wheeler loan is a secured loan, meaning your bike acts as a collateral till the loan is repaid. Secured loans usually don't have strict credit score check criteria.
3. Check Out Prepayment Charges
Most banks charge a fee for prepaying your two-wheeler loan before the agreed-upon tenure. It's crucial to understand how much the bank is likely to charge you in case you decide to foreclose your loan. Negotiating the foreclosure fee can give you flexibility in managing dynamic interest rates and allow you to save on interest costs.
For example, let's say you have a two-wheeler loan with an outstanding amount of ₹1,00,000 and an interest rate of 10%. If the foreclosure fee is 2% of the outstanding amount, you would incur a charge of ₹2,000 for prepaying the loan. By negotiating this fee or opting for a bank with lower charges, you can potentially save money when closing your loan early.
4. Choose a Shorter Loan Tenure
While banks may offer the option of longer loan tenures for your two-wheeler loan, it's advisable to choose a shorter tenure whenever possible. Opting for a longer tenure may seem appealing as it reduces your monthly instalment amount, but it also increases the overall interest paid over the loan term.
5. Relationship with the Bank
If you're a long-term customer with a particular bank, you may be eligible for deals and offers. Banks often roll out such offers exclusively to their prime customers. Such offers may include lower interest rates, reduced processing fees, higher financing amount, etc.
Final Thoughts
Consider all these factors to negotiate better two-wheeler loan deals. Banks prefer responsible offering loan discounts to long-term customers. Even if you don't have a long-term relationship with the bank, keep your credit score healthy to enjoy best two-wheeler loan interest rates.
Ujjivan SFB offers affordable two-wheeler loans. Enjoy competitive rates, financing up to 95% of the on-road price of the vehicle, low processing fees, flexible repayment tenure, and more.
FAQs
1. How to lower my bike loan interest rate?
Having a good credit score, above 750, could help you fetch lower interest rate on your two-wheeler loan. Also, making maximum down payment would help you lower the loan amount and interest. Additionally, opting for a short-term loan, may help you enjoy potentially lower interest rates, though the initial EMIs would be higher compared to long-term loans. That's because, for long-term loans, you end up paying more towards the interest.
2. What is the processing fee for a two-wheeler loan?
The processing fee for a two-wheeler loan typically ranges from 1% to 3% of the loan amount plus applicable GST. However, some banks may offer promotional discounts or waive off processing fees during certain periods. Check with your bank for better clarity.
3. Is it better to opt for a fixed or floating interest rate on a two-wheeler loan?
The choice between a fixed or floating interest rate depends on your risk appetite and market conditions. A fixed interest rate offers stability and predictability in EMIs, while a floating interest rate can fluctuate based on market trends.
4. What is the foreclosure charge for two-wheeler loans?
Two-wheeler loan prepayment charge may vary across banks. For Ujjivan SFB Two-Wheeler Loan foreclosure, it's 2% of principal outstanding, if loan is pre-closed on or before 12 months from date of disbursement and 1% of principal outstanding, if loan is pre-closed after 12 months from date of disbursement.
5. How does my credit score impact my chances of negotiating better terms for a two-wheeler loan?
A higher credit score indicates good financial discipline and increases your chances of negotiating for lower interest rates and better loan terms on your two-wheeler loan.
6. How to close two-wheeler loan early?
To foreclose your two-wheeler loan, you need to pay the outstanding principal along with the accrued interest and foreclosure charges (if applicable). Once you close your loan, banks usually give a 'No Dues' certificate as a proof that all loan dues have been repaid.
7. Should I clear my existing debts before applying for a two-wheeler loan?
It is advisable to clear existing debts before applying for a two-wheeler loan. Having multiple debts can negatively impact your credit score and increase the rate of interest.
8. Is it possible to negotiate a longer loan tenure for lower EMIs?
While longer tenures result in lower EMIs, they also increase the interest component. Negotiate a tenure that suits your repayment capacity while minimising the overall interest paid.
9. Are there any seasonal offers or special events where I can get better terms on my two-wheeler loan?
Many banks provide discounted interest rates and special offers during festivals or promotional periods. Keep an eye out for such opportunities to secure better loan terms.
10. How do I know if my credit score is good enough to negotiate better loan terms?
A credit score above 750 is generally considered good. Check with banks about their specific credit score requirements for lower interest rates.
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