The introduction of bike loans in India makes it easier for both the middle class and lower-middle-class sections to drive their dream bike. However, before you apply for this loan, you need to pick up the right lender. But what does it mean to be the perfect lender? It's the one that does not have stringent bike loan eligibility. Read the entire article to fully comprehend the bike loan eligibility criteria.
Applicant's Age:
Most of the individuals offer bike loans to individuals who are over the age of 18. Age is an important factor in any sort of loan. It is believed that individuals under the age of 18 or who have reached retirement age have zero or minimal earning potential. And, because of the credit risk, every lending institution has a minimum and maximum age requirement for bike loan eligibility. However, if you are meeting the lending institution's minimum age requirement but don't have enough earning potential, consider including a co-applicant on your bike loan application form. Always remember that the repayment responsibility of the co-applicant is similar to that of yours.
Down-payment:
To get a bike loan in India, you need to put up a certain amount as a down-payment. Usually, financial institutions will provide you with a bike loan with a maximum LTV of 95% of the bike's on-road price. The higher loan value implies higher credit risk. Therefore, by lowering the loan amount and increasing the down payment, you can get instant loan approval. In addition to that, you must always remember that the higher down-payment also ensures the lower interest on your bike loan. However, don't hunt for another loan or ask a friend or relative for financial aid to increase the down-payment amount.
Source of Income
To ensure whether or not you fall fit in the lender's minimal bike loan eligibility criteria, the income factor plays a crucial role. Salaried employees are always preferred over self-employed individuals. This is due to the fact that salaried employees receive a consistent and predictable monthly paycheque. Self-employed people, on the other hand, may experience significant fluctuations in their monthly income. However, when it comes to minimum income requirements, both salaried and self-employed individuals benefits here. Even if your monthly income is low, the lending institution will not turn you down for a loan. This is because, under a bike loan, the bike you purchase is hypothecated with the lending institution lowering the risk of default.
Credit History
When you visit the lending institution website to check their minimum bike loan eligibility, you won't find any details related to credit score and history. However, this does not rule out the possibility that this aspect is taken into account throughout the credit evaluation process. The lender assesses your existing debt status, goes through your bank account statement to review your EMI payment pattern, and so on. Your credit history or score loses its importance if you are a first-time borrower and have never taken out any sort of debt before. In such situations, your income becomes the most important criterion in determining your bike loan eligibility.
Place of Residence
The location of your residence has little or no bearing on your bike loan eligibility. It does, however, affect your income and a few other aspects. If you reside in a metropolitan city, the minimum income requirement may be slightly higher than for persons who live in rural areas due to your lifestyle. So, when you apply for a bike loan in India, keep this factor in mind because it will give you an estimate of how much minimal income you will need to acquire this loan.
Number of Debts
The number of existing debts is also taken into consideration when it comes to bike loan eligibility. The more the number of debts the less likely you are eligible to be approved for the loan. To evaluate how the existing debts will impact your two-wheeler loan repayment they calculate your debt-to-income ratio.
The formula for debt-to-income percentage:
Debt-to-Income Percentage: (Monthly Debt Obligations ÷ Gross Monthly Income) × 100
Bike Model and Variant
The bike model and the variant also impacts your bike loan eligibility. The eligibility criteria and the interest rate for scooters, motorbikes, and high-end sports bikes vary from one another. In addition to that, the financing institution takes into account the bike's resale value. Bikes with a greater resale value reduce credit risk and allow lenders to recoup their losses by auctioning the bike if the borrower defaults.
The concept of resale value applies to both new and old bikes.
Relationship with the Lender
The chances that you easily fit in the lender's bike loan eligibility criteria also depends upon your relationship with the lender. If you are a lender's existing customer or have taken a loan from them in the past and have repaid the same on time, your loan approval chances are high.
Bottom Line:
Now that you are aware of all the key factors that influence bike loan eligibility, review the same before applying for a bike loan in India.
