How can I reduce my interest rate on two wheeler loan EMI?

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Do you want to buy a two-wheeler but do not want to touch your savings? If so, getting a two-wheeler loan is the best way to manage your finances without dipping into your savings or investments. Your lender will offer you an unsecured two-wheeler loan. It means that you will not have to pledge your asset with considerable value as collateral. You can secure up to 100% of the bike’s on-road price as a loan. 

It is worth noting that a two-wheeler loan comes with attractive two-wheeler interest rates and flexible loan tenure, allowing you to repay your loan within the stipulated EMIs and without containing your monthly budget. However, your two wheeler loan interest rate depends on no factors, such as age, income, credit score, current financial obligations, etc. If you want to secure the lowest interest state, you will have to convince your lender that you are trustworthy and can repay the loan on time. 

Here are the top tips to get the lowest two-wheeler loan interest rate while applying for a loan: 

Choose a lower loan amount

Your two-wheeler loan interest rate depends on how much you need as a loan. If you choose a higher loan amount, your lender will charge a higher interest rate to justify the risks involved. So, the higher your loan amount, the higher will be the two-wheeler loan interest rate. So, even though you can get up to 100% of your two-wheeler’s on-road price as a loan, you must choose a loan amount you can afford to repay with interest. If you have the budget, it is advisable to choose a lower loan amount. This way, you can save significantly on interest. 

Opt for a shorter loan tenure

Your loan tenure is another factor affecting your two-wheeler loan interest rate. Your lender may offer to repay your loan within 12 to 48 months. However, you must choose your loan tenure wisely. Keep in mind that when you choose a longer loan tenure, your EMI may reduce significantly, but you will have to pay higher interest in the loan run. Lenders charge a higher two-wheeler loan interest rate on longer loan tenure to justify the risks involved. While applying for a two wheeler loan, you must assess your affordability and choose a repayment tenure that best serves your needs. 

If you have a surplus amount in your bank account or know that you will receive a salary increment, make sure to opt for a shorter loan tenure. Doing so may increase your EMI amount, but your interest rate will reduce significantly. It is a great way to reduce the overall cost of borrowing. 

Maintain an excellent credit score

Your credit score plays a crucial role in securing a two-wheeler loan and a lower two-wheeler loan interest rate. It is a three-digit number indicating your creditworthiness, and it contains information about your credit history, length of credit history, credit utilization, credit mix, and new credit.  After your income, your lender checks your credit score to approve your loan application. 

If you wish to secure a lower interest rate on your two-wheeler loan application, you must maintain an excellent credit score. The minimum credit score requirement to get a two-wheeler loan is 750. The closer you are to the 900 credit score range, the greater your chances of securing the lowest two-wheeler loan interest rate. 

Show all your incomes

Your income is another factor affecting your two-wheeler loan interest rate. It indicates your repayment capacity. Lenders favor borrowers with higher and stable incomes. If you have multiple sources of income, it would be wise to disclose them to your lender. With a high income, you may be able to obtain the lowest interest rate. 

Leverage your relationship with your lender

Your relationship with your current financial lender has a direct impact on your interest rate. For example, if you had taken loans or opened an account with your lender in the past and ensure timely repayments, then it means you have a healthy relationship with your lender.  You can leverage your current relationship with your lender to negotiate better interest rates.  

In short 

Do not give up on your dream of owning a two-wheeler even if you are short of funds. You can still apply for a two-wheeler loan and manage your finances without touching your savings. Since it is an unsecured loan, you will have to convince your lender that you are a trustworthy borrower and have a higher and stable income. The eligibility factors, such as age, income, credit score, loan amount, loan tenure, and your relationship with your lender have a critical role in your two-wheeler loan interest rate.