Car loan: Choosing the right lender for your two-wheeler

Two-wheeler sales are picking up after the pandemic. But in two-wheeler transactions, the loan participation is relatively small compared to four-wheelers. Should you finance it or should you pay the entire price upfront?

Sumit Chhazed, the co-founder and CEO of OTO – the two-wheeler financing start-up – told FE that insufficient funds should not stand in the way of owning a two-wheeler, as numerous NBFCs and banks are willing to extend two-wheeler loans. However, the prices and services offered are different. So how do you choose the right lender for your two-wheeler?

Eligibility Criteria

Chhazed said one has to go through the eligibility criteria carefully. The most commonly accepted requirements are residency (fixed address and must have been a citizen of the country for at least one year), age (must be between 21 and 60 years old, although some lenders may allow credit to the 18 to 20 age group if a co-applicant available) and Experian score of 600 and 650 in case of NIP (no proof of income).

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income status

Lenders can verify your income and employment status while offering a loan. “You are more likely to grant a loan if you have a minimum salary of Rs 30,000 and the loan will only be granted upon submission of a three-month payslip in the case of white-collar workers and a six-month payslip for self-employed workers,” Chhazed said. “However, there are special cases where people with a salary of Rs 10,000-12,000 can get a loan of 1 lakh.”

loan process

Banks and NBFCs offer a paperless process and instant loan approval. However, the borrower needs to do detailed research regarding the processing time, required documents and inquire about the loan process with the lender before applying for a loan. “Always choose a lender that best suits your needs,” Chhazed said.


The loan term for a two-wheeler can be between 1 and 3 years. Some lenders may even offer a longer term (4-5 years). You can also complete it with a higher EMI in six months.

LTV ratio

The LTV ratio breaks down the amount to be given as equity in the form of a down payment on the debt. “Many financial institutions provide 90-95% of a bike’s value as LTV. The credit profile of the applicant is taken into account. A borrower must always review the LTV ratio to ensure there is an appropriate balance between the down payment and the amount borrowed as debt based on your ability to repay,” Chhazed said.

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interest rate

The interest rate is set by the financial institution based on the tenure you choose and the person’s creditworthiness. “You can expect 8-15% interest (flat rate) on a two-wheeler,” Chhazed said. “Compare the interest rates offered by different lenders and choose the one that offers the lowest interest rate.”

Additional costs

Some lenders may offer you a lower interest rate but may charge additional fees in the form of processing fees. “Be careful and read the fine print on the loan terms about late fees, processing fees, and bounce fees,” Chhazed said.

special offers

From time to time there are special offers, especially now that the Christmas season is upon us.

Customer service

Chhazed added that people often overlook customer service. “Choose a lender that has a proactive customer service department as you would likely have questions and need assistance throughout the loan repayment process,” he said. “With the right research, you can make your two-wheeler dream a reality.”

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