How does my credit score affect the EMI on a two-wheeler loan?

Your credit score plays an important role in determining the interest rate and, thus, the Equated Monthly Instalment (EMI) you pay for a two-wheeler loan.

Higher Credit Score - Better Interest Rates

If your credit score is 750 or above, financial institutions consider you a low-risk applicant and offer lower interest rates on the two-wheeler loan. This directly lowers your EMI amount.

Lower Credit Scores - Higher Interest Rates

If your credit score is below 750, especially below 700 (say between 650 and 750), loan providers may charge a higher interest rate as they view you as a high-risk applicant. Lower scores indicate past defaults or credit card dues, making loan providers charge higher interest rates.

Poor Credit Score - Higher Interest Rates or Loan Rejection

In some cases, if your credit score is very low, below 650, loan providers may reject the two-wheeler loan application itself, considering you are likely to default. A low score highlights that you have defaulted frequently in the past. Nevertheless, between 600 and 650, you can still get approval but at much higher interest rates and EMIs. It depends on the loan provider.