Two-Wheeler Loan- A Complete Guide

A two-wheeler loan online allows individuals to own a bike without placing much financial strain on themselves. The loan option offers a flexible repayment plan, allowing individuals to repay their loan over time.

In simple words, instead of giving a lump sum of money while buying a bike, you can distribute the amount over the years based on their finances. However, you need to pay interest to the lender in addition to the principal amount. You can pay the 2-wheeler loan in equated monthly installments.

Also Read: Should You Finance Your Two-Wheeler?

Individuals can apply for bike loans online with reasonable interest rates and processing fees. Here are some of the benefits of taking out a bike loan.

Competitive Interest Rates

One of the benefits of applying for two-wheeler loans online is competitive interest rates. The interest rates for bikes differ based on your income and finances. Furthermore, with a wide interest in loans, many banks offer affordable loans to bike owners to make the purchase easier. Bike owners can get a loan with interest rates that fit their budget.

Also Read: How To Evaluate Two-Wheeler Loan Interest Rates & EMI

Quick Approvals and Disbursement

When you take out a two-wheeler loan online, you do not have to wait for lengthy paperwork and approval. The loan gets approved easily. You can verify eligibility using the online calculator and get the loan approved in minutes, with the funds in your bank account in hours.

Flexible Repayment Options

Another benefit of taking a 2-wheeler loan is the flexibility in repayment options. Many lenders are offering flexible loan terms ranging from a few months to years, based on your needs. Bike owners can choose EMI plans based on their cash flow and financial situation.

Minimal Documentation

Two-wheeler loans usually require minimal documentation. Basic KYC papers, address proof, income details, and bank statements are generally sufficient. This simple paperwork reduces delays, speeds up loan approval, and makes the entire borrowing process smoother and more convenient for first-time or busy buyers.

Better Credit Score

Taking a two-wheeler loan and repaying EMIs on time can help improve your credit score. Consistent repayments build a positive credit history and show financial responsibility. A better credit score increases your chances of getting future loans, higher credit limits, and lower interest rates.

Also Read: What is the Best Way to Finance a Bike or Two-Wheeler in India?

Individuals must meet the bike loan eligibility criteria before applying. Here are the key eligibility criteria for getting the two-wheeler loan.

• Age: The eligible age range for applying for a two-wheeler loan in India is 21 to 65 years.
• Residential status: The applicant for a two-wheeler loan must reside in India.
• Employment type: Applicants must disclose their employment type when taking out a bike loan. Eligible categories for a two-wheeler loan include entrepreneurs, professionals, and salaried individuals.
• Income: To take out a bike loan, applicants may be salaried or non-salaried. For the salaried category, the applicant must provide their gross monthly income for the last 3 months. For the non-salaried category, the last two years' gross monthly income will be considered.
• Repayment capacity: Lenders assess your ability to repay based on income, existing liabilities, and monthly expenses to ensure EMIs remain manageable.
• Purchasing condition: The loan is approved only for purchasing a new or an eligible used two-wheeler from authorised dealers, as per the lender’s policy.

Whether you apply for a second-hand or a new bike loan, you need to consider crucial factors to make an informed decision.

Loan Amount

One of the crucial factors in choosing a two-wheeler loan is the loan amount. The loan amount is the principal you pay to buy a vehicle, which generally covers the ex-showroom price, registration fees, and insurance. If you choose the higher loan amount, you will need to pay a higher premium.

Interest Rate

The interest rate of a 2-wheeler loan is generally the cost of borrowing money from the lender. It is generally expressed in percentage. A higher percentage means a higher interest rate you need to pay to the lender, while a lower percentage means a lower amount. This interest rate is in addition to the principal amount. Choose the interest rate that fits your finances.

Loan Tenure

Loan tenure is the amount of time you will get to pay the loan amount, including principal and interest. The loan tenure may vary from lender to lender. It also depends on the individual's income and capacity. Choosing a short tenure means you will get off the loan quickly, while a long tenure lasts for years.

Down Payment

Another important factor to consider when taking out a loan for our new or used bike loan is the down payment. It is the amount you pay upfront to the dealer, and the rest you finance. A higher down payment means a lower loan amount, leading to lower EMIs. Therefore, it is crucial to carefully decide how much to pay upfront.

Credit Score

Your credit score is an important factor when applying for a loan against a two-wheeler RC book or a regular bike loan. It reflects your past repayment behaviour and credit usage. A good credit score improves approval chances and helps you get lower interest rates and better loan terms.

Processing Fees and Other Charges

Apart from interest, lenders may charge processing fees and other costs such as documentation or late payment charges. These fees vary from lender to lender and add to the overall loan cost. Always check and compare these charges in advance to avoid unexpected expenses later.

Getting a two-wheeler loan is an easy process if you meet the eligibility criteria and have all the required documents in place. Here are the steps you need to follow for the best two-wheeler loan.

Step 1: Select the Lender

The very first step is to choose the lender. Consider factors such as interest rates, processing fees, customer service, and more when choosing a lender. Knowing all these factors helps you select the right lender.

Step 2: Confirm Loan Eligibility

Next, you need to confirm your loan eligibility. Most lenders offer online tools on their websites that let you check eligibility by entering details such as age, income, etc. Confirming the eligibility makes the process pretty straightforward.

Step 3: Apply for Loan

Once you know you are eligible for taking a 2-wheeler loan, you need to apply for the loan by filling out the application form. You need to enter your personal details, such as your name and address, in the form. Along with your details, the vehicle details should also be mentioned in the form.

Step 4: Submit Documents

Submitting the loan form alone is not enough; you also need to submit additional documents, such as address and income proof, to the lender. Ensure all documents are accurate and submitted on time to speed verification and avoid unnecessary delays.

Step 5: Verification and Loan Sanction

Once documents are submitted, the lender verifies your details, income, and credit profile. This may include phone calls or field verification. If everything checks out and you meet the eligibility criteria, the lender approves and sanctions your two-wheeler loan.

Step 6: Disbursement and Vehicle Delivery

After loan sanction, the approved amount is disbursed directly to the dealer or seller. Once payment is completed, you can proceed with the bike registration and take delivery of your new or used two-wheeler.

Also Read: How To Buy A Bike On EMI

Here is the list of documents required for applying for a bike loan in India.

• Copy of Aadhar card, driving licence, PAN card, etc
• Copy of electricity bill, phone bill, etc
• Copy of payslips
• Copy of Form 16
• Income tax return document
• Copy of last month's bank statement
• Recent passport size photograph
• Any additional document asked by the authority.

Documents for Applicant without Income Proof

• Recent bank account statements
• Certificate of business incorporation or documents showing business continuity for the past three years
• Documents confirming ownership of your residence
• Record of previous loan repayments
• Valid proof of identity

Documents for Applicant with Agriculture Income

• Documents showing ownership of agricultural land or a Pattadar passbook
• Recent bank account statements
• Proof confirming ownership of residential property
• Past repayment history or credit record
• Valid identity documents

The applicable charges for two-wheeler loans may vary depending on lender to lender. However, the charges fall into three categories, which we will discuss.

Upfront Fees and Charges

These are the charges applicants need to pay when applying for a loan. These charges are generally one-time and non-refundable.

• Processing Fees: The amount you need to pay the lender to process the loan. This is the non-refundable amount to process your loan. This amount is generally 1% to 5% of the loan amount.
• Stamp Duty and Other Statutory Charges: These are the charges vehicle owners must pay under their state's regulations.
• Documentation Charges: These are flat or percentage-based fees for verifying documentation or completing paperwork. These charges usually fall between ₹1,999 and ₹3,500.
• Post-Disbursal Documentation: These are the charges for managing loan-related documents after disbursement. This generally includes the recordkeeping and storage of loan documents.
• Administration or Other Charges: Additional charges levied by the lender. It is also known as the admin fee.

Ongoing Charges

These are the charges applied during the loan repayment period. There are various charges in this category.

• Interest Rate (ROI): This is the interest rate set by the lender based on your income, vehicle type, credit score, etc. This is the amount you need to pay to the lender for taking the loan.
• Penal Charges/Late Payment Fees: This is the amount you need to pay if the EMI payments are delayed. This is generally calculated as a percentage, usually between 2 to 3% per month.
• EMI Bounce/Payment Return Charges: This is the amount you need to pay if the EMI payment is bounced due to insufficient funds.
• Repayment Mode Change Charges: This fee applies if you change your bike loan repayment method.
• Statement of Accounts: If you want a physical copy of your bank statements, you need to pay a nominal fee to the bank. However, digital copies are generally available for free.

Post-Closure Charges

If the applicant wants to close the loan account early, they must pay the charges. These charges include:

• Foreclosure Charges: These are the charges applicable to the loan before the loan tenure ends. Foreclosure charges are typically 3% to 5% of the principal amount. This may also vary depending on the lender and the long duration.
• Part-Prepayment Charges: These are the charges applicants need to pay if they pay the lump sum amount in between to reduce the principal amount.
• No Objection Certificate (NOC) Charges: These are the charges vehicle owners must pay to obtain a no-objection certificate for a bike loan.
• Loan Cancellation Charges: Lastly, if you want to cancel the loan after disbursement, you need to pay a cancellation charge and any applicable interest to the lender.

Calculation of two-wheeler loan EMI is generally done using a standard formula that factors in the loan amount, interest rate, and loan tenure. This formula helps you estimate your monthly repayment in advance and plan your budget better before applying for the bike loan.

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

Where P is principal, R is the monthly interest rate, and N is the tenure period.

Let us understand the calculation by example. Suppose Rahul takes a bike loan of ₹1,00,000 at an interest rate of
12% per annum for a tenure of 24 months.

P (Principal) = ₹1,00,000

R (Monthly interest rate) = 12% ÷ 12 = 1% = 0.01

N (Tenure) = 24 months

EMI = [1,00,000 × 0.01 × (1+0.01)²⁴] / [(1+0.01)²⁴ − 1]

After the calculation, the EMI is approximately ₹4,707 per month. This means Rahul needs to pay ₹4,707 per month for the next 24 months.

Calculate EMI for a Bike Loan Using Calculator

The easiest way to calculate your bike loan EMI is by using an online EMI calculator. Here is how you can use the TATA AIG two-wheeler EMI calculator.

• Step 1: Go to the TATA AIG two-wheeler EMI calculator page.
• Step 2: Enter the loan amount, interest rate, and loan tenure.
• Step 3: Click on the “Submit” option. The tool will display the estimated EMI based on the details.

The two-wheeler loan tenure is the period over which you repay the loan through monthly EMIs. Most lenders offer flexible tenures ranging from 12 months to 60 months. A shorter tenure period means higher EMIs but lower interest rate, while an extended tenure reduces EMI amounts but also enhances the interest amount.

When choosing a two-wheeler loan online, vehicle owners need to carefully assess their financial situation. Here are some tips to help you choose the best two-wheeler loan lender.

Assess Your Finances

The first thing you need to do as a bike loan applicant is to determine how much you can pay as a down payment. This should be done by analysing your finances. You can use the online bike calculator to find out the EMIs.

Check Credit Score

A good credit score plays a big role in bike loan approval. It reflects your repayment history and financial discipline. A higher score improves your chances of approval and helps you get better interest rates and loan terms.

Compare Different Lenders

Always compare loan offers from multiple lenders before making a decision. Look at interest rates, processing fees, loan tenure options, and repayment flexibility. Comparing helps you choose a loan that offers the best overall value.

Look for Special Offer

Many lenders offer festive discounts, lower interest rates, or reduced processing fees on two-wheeler loans. Always check for ongoing offers before applying, as these can significantly reduce your overall loan cost.

Read Fine Print Carefully

Before finalising the loan, read all terms and conditions carefully. Pay attention to interest rates, fees, prepayment charges, and penalties to avoid surprises later.

Knowing all about the 2-wheeler loan is essential if you are planning to finance your bike. There are various cheapest bike loan options available, but it comes with hidden charges and complex paperwork. Instead of going with any random lender, applicants need to consider factors such as lender reputation, loan process, paperwork, interest rate, and more to make an informed decision.

In addition, bike owners need to consider buying a bike insurance policy to protect their investment. A bike insurance policy protects your bike against accidents, theft, and unexpected damage, ensuring your investment stays secure even after purchase.

TATA AIG offers a customised insurance policy for bikes tailored to your driving needs. For example, we have a third-party bike insurance plan for individuals who want to comply with the law and only need basic protection. Apart from this, we offer a comprehensive bike insurance policy that protects against third-party liability, property damage, and damage to the bike.

Along with this, our plan also comes with unique add-ons, such as zero depreciation in bike insurance, which help you get higher claim payouts without worrying about depreciation on bike parts.

Furthermore, with access to a wide network of cashless garages across the country, you can get your bike repaired without paying any upfront cash. Secure your bike with our affordable bike insurance policy now!