Can I buy a Bike without a Down Payment?

The current pandemic has made the personal commuting vehicle a necessity. Availing public transport increases the risk of Corona Virus transmission, and most of the public transports are not sterilized properly. The most economical personal commuting vehicle is a bike. It consumes less fuel, takes less space so garage cost is less, servicing cost is much cheaper than a car, avoids traffic as it can take narrow lanes.

Most of us face difficulty arranging the required cash to purchase a bike. So we apply for a bike loan, where we need to pay upfront money as a down payment and the rest of the balance is financed by the loan provider. But you can also buy a bike without paying any down payment. There are loan providers like Shriram Finance that provide  100% financing on a bike loan.  with a simple application process.

Down payment on a Loan

Whenever we buy any bike, the moment it leaves the showroom, it starts to depreciate. It is said that when a new bike is delivered to the owner’s house from the showroom, it has already lost 10% to 15% of its market value. So to avoid this risk of depreciation, loan providers keep a margin to themselves. The margin is the difference between the cost of the bike and the loan amount provided. So suppose the cost of the bike is INR 50,000 and the loan provided is INR 45,000. The bike owner will pay the difference of INR 5,000, and it is called the down-payment. If the bike owner fails to make monthly instalment payments, then the loan issuer can sell the bike in the market and recover the loan amount. Having the INR 5,000 as a down-payment will act as a safety cushion if the bike is not sold at the desired price.

Bike Loan without any Down payment

A zero loan without down payment loan is called a 100% financing Loan. The lender doesn’t ask for any margin or down payment, and the lender finances the bike’s whole cost. There is some processing fee that the borrower will have to pay, but the lender finances the bike’s entire cost.

Benefits of 100% Financing Loan

The benefits of 100% financing on bike loans are as follows:

• The borrower will not have to arrange funds for purchasing a bike. Most of the businesses are making losses, and there is very little money flowing in the market. So the borrower is saved from taking the trouble of fund arrangement for the down-payment.
• The liquidity of the borrower is not hampered. Down-payments are often paid from savings. So if the borrower opts for the 100% financing bike loan, then there is no hit in the borrower’s savings.
• There is no risk of losing the down-payment if the borrower fails to make monthly instalment payments. In the case of a normal loan with a down-payment, there is a risk that the borrower will lose the down-payment if the lender takes back the vehicle. For a 100% financed loan, the borrower’s maximum loss will be the instalments paid, as there was no upfront money paid by the borrower at the loan initiation.

Eligibility Requirement to apply for a Zero Down Payment Bike Loan

The eligibility requirements for a zero down payment loan are mentioned below.

• You need to be at least 21 years of age to apply for a 100% financed bike loan. This is the minimum age criteria. Individuals below 21 years are not allowed for a bike loan.
• During the time of loan maturity, the borrower’s maximum age can be 59. If the borrower’s age crosses 59 at the maturity, the borrower will not be eligible for the loan.
• Salaried, as well as self-employed persons, can apply for the loan. There are no criteria that the borrower needs to have a fixed, stable cash-generating capability. Usually, salaried persons have fixed cash-generating capability and get loans loan easily, but self-employed persons can also apply for a 100% financing on bike loan.
• Any applicant who has just been employed will not be eligible for a bike loan. The person should work for a year, and their minimum salary should be INR 12,000 / month.
• For self-employed individuals, the applicant should at least stay in the same business for two years. If there is no continuity in the business, then the applicant’s request will be denied.
• The applicant must stay at the provided address for at least one year. If the applicant has just moved in from a different place and wants to apply for a bike loan, the lender will not accept the request.
• All the previous loans, both running and dormant, must be declared by the applicant. This helps the lender to judge the creditworthiness of the borrower.
• Issuing false cheques harms the credit quality of the applicant. So if there have been any cheque bounces in the last 12 months of the applicant, then their loan application will be denied.

Charges and Interest for Applying a 100% Financed Loan

• Loan Processing Charges vary from state to state. There are different policies for different states, so the loan processing charges also vary. The maximum charge can be 3% on the loan amount. A loan processing charge is a charge levied for processing the documents.
• Documentation charges also vary from state to state. Each state has different documentation rules. The maximum charge can be 3% on the loan amount. These are costs for filling and preparing several paper works.
• Interest charged on the loan amount. Lenders charge a floating or fixed rate of interest from the borrower on the loan amount. The interest rate usually keeps changing in the market, and lenders compete by offering a lower rate.
• Foreclosing charges that start from 4%. Foreclosing charges are charges that are imposed by the lender on the borrower. This penalty is charged if the borrower wants to repay the loan before the maturity date.
• Stamp duty charges are official charges as determined by the respective state governments. The charges vary across states.

Conclusion

A 100% financed bike loan doesn’t require any upfront payment by the applicants. This is a great feature as any individual who need a bike urgently and doesn’t have enough cash for a down-payment can also apply. The procedure of applying for a 100% financed loan is very simple. You can reach any renowned lender’s website like Shriram Finance, where all the information about 100% financed loan and the procedure is mentioned in detail. There are loan calculators as well to help a prospective borrower have a detailed estimation of the monthly instalment payment based on the maturity, interest rate, and loan value. So if you plan to buy a bike, then get it financed without paying a penny from your pocket.