A two-wheeler loan is a type of loan that helps individuals finance the purchase of a new or used motorcycle or scooter. With the rising demand for personal transport, two-wheeler loans have become increasingly popular in India, offering flexible repayment terms, competitive interest rates, and easy eligibility criteria. Many banks and Non-Banking Financial Companies (NBFCs) provide two-wheeler loans to salaried and self-employed individuals.
In this guide, we will cover every aspect of two-wheeler loans, including benefits, eligibility, documentation, interest rates, and the loan application process.
Key Benefits of a Two-Wheeler Loan
- Affordable Financing: You can borrow up to 90-100% of the two-wheeler’s on-road price, minimizing the need for upfront payments.
- Flexible Repayment Options: Loan tenures generally range from 12 to 60 months, allowing you to choose the duration that suits your financial capacity.
- Low Interest Rates: Two-wheeler loans come with competitive interest rates starting from 8.5% per annum.
- Minimal Documentation: The documentation process is simple, with basic income and identity proof needed for approval.
- Quick Disbursal: The loan is processed and disbursed quickly, often within 24 to 48 hours.
- Credit Score Improvement: Timely repayment of the two-wheeler loan can positively impact your credit score.
Types of Two-Wheeler Loans
- New Two-Wheeler Loan: Designed for purchasing brand-new motorcycles or scooters, this loan covers most of the vehicle’s cost.
- Used Two-Wheeler Loan: This loan option finances the purchase of second-hand two-wheelers. The loan amount depends on the age and condition of the vehicle.
- Secured Loan: In secured two-wheeler loans, the bike itself is the collateral, reducing the interest rate and risks for the lender.
- Unsecured Loan: This type of loan does not require any collateral but may come with higher interest rates.
Eligibility Criteria for Two-Wheeler Loan
While eligibility criteria may differ slightly between banks and NBFCs, the general requirements for availing of a two-wheeler loan include:
- Age: Applicant should be between 18 to 65 years.
- Employment Status: Both salaried and self-employed individuals can apply.
- Minimum Income: The minimum income requirement ranges from ₹10,000 to ₹20,000 per month depending on the lender.
- Credit Score: A credit score above 650 increases your chances of loan approval with lower interest rates.
- Resident Status: The applicant must be a resident of India with a stable income source.
Required Documents for Two-Wheeler Loan
To process a two-wheeler loan, you need to submit a few essential documents, including:
- Identity Proof: Aadhaar, PAN card, Passport, or Voter ID
- Address Proof: Utility bills, rental agreement, or passport
- Income Proof: Salary slips, bank statements (last 3-6 months), or ITR for self-employed individuals
- Vehicle Documents: Invoice from the dealer for new vehicles or sale agreement for used vehicles
- Photographs: Recent passport-sized photographs
Two-Wheeler Loan Interest Rates
Interest rates on two-wheeler loans typically range from 8.50% to 15% per annum. The actual interest rate depends on various factors like the loan amount, tenure, the applicant’s credit score, and the financial institution.
Interest Rates of Popular Banks and NBFCs Offering Two-Wheeler Loans:
| Bank/NBFC | Interest Rate (p.a.) | Processing Fee |
|---|---|---|
| HDFC Bank | 9.50% onwards | Up to 2.5% |
| SBI (State Bank of India) | 16.25% onwards | 1.25% of loan amount |
| Bajaj Finserv | 7.75% onwards | 1% of loan amount |
| Axis Bank | 10.50% onwards | Up to ₹6,000 |
| Hero FinCorp | 11% onwards | Varies by loan amount |
| Tata Capital | 10.75% onwards | Up to 2.5% |
| ICICI Bank | 10.50% onwards | 2% of loan amount |
| IDFC First Bank | 10.75% onwards | 1.5% of loan amount |
Note: Interest rates may vary based on the applicant’s profile and the lender’s terms.
EMI Calculation for Two-Wheeler Loans
The Equated Monthly Installment (EMI) is the monthly amount you need to pay to the lender to repay your loan. You can use an online EMI calculator to estimate your EMI by inputting the loan amount, interest rate, and tenure.
For example, if you take a loan of ₹1 lakh at 10.5% interest for a tenure of 3 years, your EMI will be approximately ₹3,241.
EMI Formula:
The formula to calculate EMI is:EMI=P×R×(1+R)N(1+R)N−1EMI = \frac{P \times R \times (1 + R)^N}{(1 + R)^N – 1}EMI=(1+R)N−1P×R×(1+R)N
Where:
- P = Loan amount
- R = Monthly interest rate
- N = Loan tenure in months
Fees and Charges Associated with Two-Wheeler Loans
- Processing Fee: 1% to 3% of the loan amount (varies by lender)
- Prepayment Charges: Some banks may charge a fee for early repayment of the loan.
- Late Payment Penalty: 1% to 2% of the overdue amount if EMI payments are delayed.
- Loan Cancellation Charges: Applicable if the loan is canceled after sanctioning, usually 2% of the loan amount.
How to Apply for a Two-Wheeler Loan
- Online Application: Most banks and NBFCs offer the option to apply online through their websites or mobile apps.
- Branch Visit: You can also visit a bank branch, submit the required documents, and speak to a representative to initiate the loan process.
- Dealer Financing: Many vehicle dealerships have tie-ups with financial institutions and provide instant two-wheeler loans during the purchase process.
Steps to Apply:
- Research and compare two-wheeler loan offers.
- Choose the lender and check the eligibility criteria.
- Fill out the loan application form online or offline.
- Submit the required documents for verification.
- The loan gets sanctioned, and the amount is disbursed either directly to the dealer or to your account.
Top Banks and NBFCs Offering Two-Wheeler Loans in India
1. HDFC Bank Two-Wheeler Loan
- Loan Amount: Up to ₹3 lakh
- Interest Rate: Starting at 9.50% p.a.
- Processing Fee: Up to 2.5% of the loan amount
- Tenure: Up to 48 months
- Eligibility: Salaried and self-employed individuals
2. State Bank of India (SBI) Two-Wheeler Loan
- Loan Amount: Up to ₹2.5 lakh
- Interest Rate: 16.25% p.a. onwards
- Processing Fee: 1.25% of loan amount
- Tenure: Up to 48 months
- Eligibility: Salaried employees, self-employed, and farmers
3. Bajaj Finserv Two-Wheeler Loan
- Loan Amount: Up to ₹2 lakh
- Interest Rate: 7.75% onwards
- Processing Fee: 1% of loan amount
- Tenure: Up to 36 months
- Eligibility: Salaried, self-employed, and professionals
4. ICICI Bank Two-Wheeler Loan
- Loan Amount: Up to ₹3 lakh
- Interest Rate: 10.50% onwards
- Processing Fee: 2% of loan amount
- Tenure: Up to 60 months
- Eligibility: Salaried employees and self-employed individuals
5. Tata Capital Two-Wheeler Loan
- Loan Amount: Up to ₹2 lakh
- Interest Rate: 10.75% onwards
- Processing Fee: Up to 2.5% of loan amount
- Tenure: Up to 48 months
- Eligibility: Salaried and self-employed professionals
Pros and Cons of Two-Wheeler Loans
Pros:
- Affordable Down Payment: Two-wheeler loans often cover 90-100% of the vehicle’s cost.
- No Collateral Required: Most two-wheeler loans are unsecured, requiring no collateral.
- Flexible Repayment: Tenures ranging from 12 to 60 months provide flexibility.
- Quick Disbursal: Loans are processed and disbursed quickly, especially when applied online.
- Credit Score Impact: Timely repayment helps improve your credit score.
Cons:
- Higher Interest Rates: Compared to other secured loans, interest rates may be slightly higher.
- Additional Charges: Processing fees and prepayment penalties may add to the total cost of the loan.
- EMI Burden: Missing EMIs can lead to penalties and affect your credit score.
Conclusion
A two-wheeler loan is an excellent option for individuals who want to purchase a motorcycle or scooter without bearing the entire financial burden upfront. With competitive interest rates, quick disbursal, and flexible repayment terms, two-wheeler loans make owning a vehicle easy and affordable. Be sure to compare different lenders and choose the one that offers the best terms based on your financial situation.
