Does The Bike Loan Interest Rate Differ For Salaried And Non-Salaried?

Owning a bike is a dream for many individuals. While buying a bike can be a costly exercise, several financing options like bike loans can help you afford a bike. However, the interest rate of these bike loans is often a critical aspect to consider. One question that many potential borrowers have is whether the bike loan interest rate differs for salaried and non-salaried individuals.

In this blog, we will explore the factors that influence the bike loan interest rate and whether salaried and non-salaried individuals differ.

Factors that influence the bike loan interest rate

Listed below are the primary factors that influence the bike loan interest rates:

• Annual income

The borrower’s annual income is an important factor that lenders consider when determining the interest rate of a bike loan. A higher annual income is generally viewed as a sign of stability and a better ability to repay the loan, which can result in a lower interest rate. However, it is not the only factor influencing your bike loan interest rate. Other factors such as credit score, employment type, and debt-to-income ratio are also considered.

• Employment type

The type of employment can also influence the interest rate of a bike loan. Borrowers with stable jobs and good employment records are often seen as a lower risk to lenders and are more likely to receive a lower interest rate. It can also include factors such as the stability of the employer and the length of employment.

• Credit score

The borrower’s credit score is one of the most important factors that influence the interest rate of a bike loan. A higher credit score generally indicates that the borrower has a good credit history and is more likely to repay the loan. It can result in a lower interest rate, as the lender sees the borrower as a lower risk.

• Age

The borrower’s age is a major factor influencing the interest rate of a bike loan. Lenders charge a higher interest rate if you are nearing retirement age since your repayment capacity is lower than younger borrowers.

• Debt to income ratio (DTI)

Your debt to income ratio (DTI) influences your bike loan interest rate. A lower DTI of 40% or less is generally seen as a sign of a better ability to repay the loan, which can result in a lower interest rate. The ratio lets lenders decide whether you can take a loan, depending on your monthly income, debt, and other financial responsibilities.

• Down payment

The amount you pay as a down payment also affects your bike loan interest rate. If you pay 30% to 40% of the bike’s on-road price as a down payment, you can avail of a bike loan with a low-interest rate.

Do salaried individuals get better two-wheeler loan interest rates?

It’s not just the employment status that influences your bike loan interest rate. Lenders also consider the type of employment, whether you are salaried or self-employed. Self-employed or non-salaried individuals classify as high-risk borrowers due to their unpredictable source of income. Even though salaried and self-employed individuals can avail of a bike loan, lenders favour salaried individuals because they have a stable income source and are more likely to repay the loan on time.

Moreover, your monthly income can fluctuate with external factors if you are self-employed. It can result in lenders charging a risk premium and increasing interest rates. Lenders can also ask high-risk borrowers for collateral or a co-signer to secure the loan.

Variable or fixed interest rates – Which is better for you?

Variable and fixed interest rates are the two interest rates levied on bike loans. Variable or floating interest rates fluctuate depending on the market conditions. These are comparatively low compared to fixed rates.

On the other hand, fixed interest rates remain the same regardless of market conditions. Fixed rates offer financial stability and security despite being higher than variable interest rates. It allows you to plan your budget and EMIs accordingly. Moreover, fixed rates are beneficial when the interest rates are expected to rise since you would have to pay higher interest on the bike loan. Floating interest rates can fluctuate abruptly, causing you to pay more interest than planned.

Bike loan interest rates 2023

The table below shows the bike loan interest rates as charged by top lenders in 2023.

Bank	Interest rates (pa)	Loan amount
Union Bank of India	9.90% – 10.00%	Rs. 10 Lakhs
State Bank of India	16.25% – 18.00%	Up to Rs. 3 Lakhs
Bank of India	6.85% – 8.55%	Up to Rs. 50 lakhs
Punjab National Bank	8.65% – 10.00%	Rs. 10 lakhs
HDFC Bank	20.90%	Rs. 5 Lakhs
Axis Bank	10.80% – 28.30%	–

 

Tips to avail of bike loan at low-interest rates

Availing of a bike loan at low-interest rates can be challenging. Here are a few tips that will help you get a bike loan at a low-interest rate.

• Good credit score

Your credit score is one of the most crucial factors determining your bike loan’s interest rate. A good credit score indicates that you are a responsible borrower who pays your bills on time. It also shows that you have a stable income and a good financial track record. If you have a good credit score, you will likely get a lower interest rate on your bike loan.

• Low debt status

A high level of debt can impact your credit score and make it harder to get a low-interest rate bike loan. To ensure a low debt status, you must pay off your debts and keep your credit card balances low. It will improve your debt-to-income ratio and increase your chances of getting a low-interest-rate bike loan.

• Good relations with the lender

Building a good relationship with your lender can also help you get a low-interest rate bike loan. You can establish a good rapport with your lender by showing that you are a trustworthy and responsible borrower. It can lead to better loan terms, including a lower interest rate.

In conclusion

Bike loan interest rates differ for salaried and non-salaried individuals. Self-employed and non-salaried individuals are regarded as high-risk borrowers due to a lack of stable income sources. Thus, they are charged higher interest rates compared to salaried individuals. They have a steady source of income and are more likely to repay the loan in the stipulated time. Thus, they are charged with lowered interest rates on bike loans.