Two-Wheeler Loan Expectations Vs. Reality

Expectation vs. Reality Check

• Expectation:Too much paperwork will be required
• Reality:Two-wheeler loans involve minimal paperwork. One only needs the following documents to apply for a two-wheeler loan:

1. Identity Proof (any one of the following): Driving Licence | PAN Card | Voter ID Card | Passport
2. Address Proof (any one of the following): Gas bill with Gas Book | Passport | Driving Licence
3. Other Documents: Income proofs | Passport size photos | Last 6-month bank statements | Cancelled cheque along with ACH document for ECS mandate | In case of new vehicles, vehicle registration certificate duly endorsed.

• Expectation:A two-wheeler loan takes up a lot of time!
• Reality:Two-wheeler loan sanction and disbursal is a time-efficient process. Upon furnishing the specified documents, the lender will instantly take up the application for appraisal and decide upon the approval or rejection thereof.
• Expectation:The interest rate on two-wheeler loans is soaring high!
• Reality: The two-wheeler market is booming like never before, especially after the arrival of electric vehicles. Thus, lenders are offering two-wheeler loans at affordable interest rates. The two-wheeler loan interest rates start at just 11.40% per annum.
• Expectation:The two-wheeler loan will have stringent eligibility criteria!
• Reality: The two-wheeler loan has easy to fulfil eligibility criteria. One can apply for a two-wheeler loan if:

1. The applicant is at least 21, and the maximum age at the time of loan maturity does not exceed 59.
2. May be either a salaried or self-employed individual.
3. In the case of a salaried applicant, the applicant shall have a minimum work experience of one year with a minimum salary of at least Rs. 12,000 per month.
4. In the case of a self-employed individual, the applicant shall be in the business for at least two years.
5. The applicant shall be residing at the same address for at least one year.

• Expectation:I will have to furnish collateral security for a two-wheeler loan
• Reality: The two-wheeler loan may be secured or unsecured. The choice rests with the applicant. In case of a secured loan, the applicant shall be required to furnish collateral security. However, it will consequently reduce the interest rate. If the applicant opts for an unsecured loan, then the applicant shall not be required to furnish the collateral security. However, a slightly higher interest rate may be charged in the case of an unsecured loan. Therefore, it's not necessary to furnish collateral security in case of a two-wheeler loan.
• Expectation: There is no interest benefit for two-wheeler loans unlike home loans!
• Reality: Generally, two-wheeler loans do not offer tax benefits like home loans. However, there are two exceptions:

1. Business purpose: If the two-wheeler loan is taken for business purposes, the applicant can claim interest expense as a business expense. This leads to a reduction in profits thereby inculcating tax savings.
2. Electric Vehicle:If the applicant goes for an electric two-wheeler, then the government has made special provisions for tax benefits under the Income Tax Act, 1961. Therefore, a buyer of an electric vehicle, whether a car or two-wheeler, can claim a deduction of interest paid on a two-wheeler loan under Section 80EEB of the Income Tax Act, 1961 up to Rs. 1,50,000 for each financial year.

• Expectation: I will have to make at least half of the vehicle cost as a down payment before going for a two-wheeler loan!
• Reality: Two-wheeler loans have a high LTV ratio. LTV is the loan amount financed by the financial institution against the asset value. Generally, institutions provide up to 85-90% of the on-road price of a two-wheeler as a loan. However, Shriram Finance has leaped further to benefit the borrowers with a 100% LTV ratio. Therefore, you can purchase your two-wheeler with zero down payment if your vehicle is eligible for 100% LTV.
• Expectation: I won't be able to take a two-wheeler loan as I don't have a credit history!
• Reality: Anyone who meets the eligibility criteria can secure a two-wheeler loan.
• Expectation: I won't be able to get a two-wheeler loan if I fail to meet the eligibility criteria!
• Reality: While meeting the eligibility criteria is paramount to getting any loan sanctioned, there is always a silver lining in the clouds. In most cases, income and CIBIL score are the criteria that applicants might fail to satisfy. In such a case, bringing a co-applicant or a guarantor can increase the chances of getting your loan sanctioned. Therefore, even if you fail to meet the eligibility criteria, then a co-applicant with a higher income and good CIBIL can help you get your loan sanctioned.