Top Tips to Reduce Two-Wheeler Loan Interest Rate

Are you thinking of taking out a loan to get that motorcycle you have always desired? But what if your lender offers you a bike loan at a higher interest rate? Is it possible to reduce the interest burden before or after taking out a loan? The answer is yes. Read the article to find out how. 

  1. Conduct Research 

Research should always be at the top of your priority list. Since each lender’s terms and conditions, as well as the LTV and interest rate, differ, you may be able to find a lender with an interest rate that fits your budget. It is recommended that you use the bike loan aggregator website to reduce your time and effort. 

  1. Increase Down Payment

The amount of money you pay the dealer upfront has a big impact on whether your 2 wheeler loan interest rate goes higher or down. Simply put, the higher the down payment amount, the lower will be the credit risk. Higher down payment means the borrower has invested a larger portion of their funds in the bike purchase and not the lender.  As such, if the bike is auctioned off in the event of loan default, the borrower will be upset.

  1. Choose your Tenure Carefully

Your loan tenure also influences whether the lender offers you a high or low 2 wheeler loan interest rate. Lenders usually offer a bike loan at a reasonable rate if you opt for a shorter tenure. Furthermore, a shorter loan term means that as you make instalments throughout the course of the loan, the interest portion of the loan reduces, and you begin paying more to the principal outstanding repayment. Keep in mind that as your loan term lengthens, so does the amount of interest you will have to pay.

To understand the effects of your bike loan’s term, look at the table below.


Parameters Loan X Loan Y
Loan Amount INR 65,000 INR 65,000
Tenure 2 Years 4 Years
Interest Rate 8% 8%
EMI INR 2,940 INR 1,587
Interest Payable INR 5,555 INR 11,168
Total Payable INR 70,555 INR 76,168


The table indicates that choosing a longer term puts you at a disadvantage because you will have to pay much more in interest. 

  1. Opt for Partial Prepayment

Partially prepaying a loan is one of the most prevalent ways for borrowers to reduce their outstanding principal. As the principal amount decreases, the interest component decreases as well. To do so, consider putting the windfall income to good use. You can also utilise the profits from short-term investments to pay off debt. Keep in mind that either a partial prepayment or a complete bike loan foreclosure, you will need to incur a small cost. 

Check with your lender to learn how much a foreclosure will cost you. Go ahead and do it if your budget permits it.

  1. Show additional income

Provide your supplementary source of income to the lender to lessen your 2 wheeler bike loan interest rate. Additional income might come from a variety of sources. You can supplement your income with rental income, freelance income, stock market trading, and a few more options. If you do so, the lender considers your profile less risky and approves your loan at a reasonable rate. 

  1. Improve your Credit Status

Before applying for a bike loan, make sure your credit history is free of any undesired records. In case you discover that your credit history is in poor shape, make an effort to fix it first. The following are some of the most common things you can do to boost your credit score.

  • Look for ways to get out of your previous loan default. Paying off your obligations boosts your credit score significantly.

  • Visit the credit bureau website to check your credit report card. If you discover that the report is missing some information or contains an error in the details, rectify it as soon as possible. It will not only assist you in improving your credit score but also in obtaining an affordable 2 wheeler loan interest rate. 
  • If you are applying for the first time, start by applying for credit cards or consumer durable loans to build your credit history.
  1. Borrow from the Existing Lender

It is always recommended to apply with an existing lender. If you have always paid your previous EMIs on time and have never failed on a loan obtained from a previous lender, you will be easily granted an affordable 2 wheeler loan interest rate.

  1. Special Offers

If at all possible, wait until a festival like Holi or Diwali to buy your bike. If at all possible, wait until a festival like Holi or Diwali to buy your bike. Purchasing your bike during the festival provides you with a special festive offer from the dealer’s side. Festivals also help you get a cheaper 2 wheeler loan interest rate. 

To Conclude: 

The aforementioned suggestions are sure-shot solutions to reduce your interest payments or obtain a bike loan at a lower interest rate.


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