A large number of people who wish to purchase a bike often seek a loan to fund it. This makes the purchase more affordable, allowing more people to fulfil their dream of owning a bike. While both salaried and non-salaried individuals are eligible for a two-wheeler loan, the rates often differ for them. You will see that salaried individuals are often offered lower bike loan interest rates than those who are self-employed. Wondering why? Let us find out.

Why do salaried people get bike loans at lower interest rates?

When lenders offer loans, they assess the risk of the borrower. Salaried employees are considered less risky than self-employed. The simple reason behind this is that salaried individuals are perceived as having a more stable income source, which increases their likelihood of paying the EMIs on time. On the other hand, self-employed individuals’ income may fluctuate depending on external factors, which can result in lenders charging higher interest rates due to a higher risk of non-payment. Thus, lenders are more confident in the ability of salaried employees to repay the loan on time. So, it becomes important to thoroughly evaluate the bike loan interest rates offered by different NBFCs and banks.

The credit score is also an important factor that lenders consider when assessing a borrower’s risk. Salaried employees with good credit scores indicate a history of responsible borrowing and timely repayments, making them less risky for lenders. This results in lower bike loan interest rates.

Let us see what other factors come into play while determining interest rates. 

Factors that affect your bike loan interest rate

Apart from your employment status, the other factors that affect your bike loan interest rate are as follows:

Monthly income: Lenders may view you as more financially stable and offer a lower bike loan interest rate if you have a high income. On the other hand, if your income is low, you may be viewed as a higher-risk borrower and may be offered a higher interest rate. It could be that you are salaried but have a low income, while someone who is self-employed may have a higher income, making them a better candidate.

Credit score and history: Lenders use your credit score to determine your creditworthiness and how likely you are to repay your loan on time. You may be offered a lower interest rate if you have a high credit score and a history of responsible borrowing.

Debt-to-income ratio: It measures how much of your income is used to pay off your debts. If you have a low debt-to-income ratio, you may be viewed as a low-risk borrower and offered a lower bike loan interest rate. However, if your debt-to-income ratio is high, you may be viewed as a high-risk borrower and offered a higher interest rate on the two-wheeler loan.

Age: If you are nearing retirement age, lenders tend to extend higher interest rates on a two-wheeler loan. This is because you may have only a few years of stable income left, thus lowering your paying capacity after some time.

Down payment: Lenders offer a lower interest rate if you make a larger down payment. It shows that you are more invested in the purchase and will honour the loan terms to be able to fund your dream bike.

Relationship with the lender: If you have a history of borrowing from the same lender and repaying your loans on time, the lender may view you as a lower-risk borrower and offer you a lower bike loan interest rate. You can also choose the bank where you have your savings account as your lender since they will have a better idea of your profile.

How to lower your bike loan interest rate?

Here are four tips to help you lower your bike loan interest rate:

Clear your debts: If you have other debts, such as personal loans or credit card balances, paying them off can help you improve your credit score, which can help you qualify for a lower interest rate on your two-wheeler loan.

Negotiate with the lender: Don’t hesitate to ask your lender for a lower interest rate. If you have a good payment history and your credit score has improved since you first took out the loan, you can negotiate a lower rate.

Apply with existing lenders: If you have other bank accounts, consider applying with them for a two-wheeler loan. Existing customers may be eligible for lower interest rates, especially those with a good payment history.

Make a bigger down payment: It can help you lower your interest rate if you can afford it. A bigger down payment reduces the amount you need to borrow, making you a less risky borrower in the eyes of lenders.

In conclusion

In conclusion, salaried individuals may have a higher chance of getting a two-wheeler loan at a lower interest rate due to their stable income and financial history. However, it’s essential to note that the interest rate will depend on various factors and may differ from lender to lender. Therefore, you must research and compare different loan options thoroughly. Doing so will help ensure they secure the best deal possible and avoid any future financial strain. Remember to make an informed decision to get the most out of a two-wheeler loan.