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Factors That Determine Two-Wheeler Loan Interest Rate


Have you been pondering buying a two-wheeler for yourself lately? Nothing serves better than a scooter or a bike to zip past the traffic during the rush hour. But then, what is holding you back? If it is insufficient funds, then worry not. There are many two-wheeler finance options available in the market and getting one with the most competitive 2 wheeler loan interest rate is not tough either. A two-wheeler loan allows the buyer to make a small down payment and take ownership of the vehicle. But before you get set to find your perfect lender, educate yourself about the factors that determine the interest rates for a two-wheeler loan.

Factors Which Affect Two-Wheeler Interest Rates

Now that we have a better understanding of what exactly a two-wheeler loan is, let us take a look at the various factors that determine the loan amount and interest rates:

  • Tenure of the Loan

This determines both the loan interest rate as well as tenure. Simply put, the longer the tenure of your loan, the higher will be the interest you pay for it. In India, most two-wheeler financiers generally offer a loan tenure from 12 months to 60 months. Thus, you can choose the tenure that suits you best. Remember, choosing a short loan tenure means having to pay a higher EMI amount and vice versa. It will be best to choose a tenure that balances EMI amount and interest rate for you. So, do your math well and choose the most convenient and comfortable option for yourself.

  • Credit Score

Lenders across the country rely on your credit score to understand your repayment capacity. Essentially, your credit score is a numerical value that is assigned to you by a credit rating agency after taking into consideration the following factors:

  • The total number of loans you have taken in the past
  • The total amount of credit you have utilised in the past
  • The total number of instances where you have made timely payments
  • The total number of instances where you have failed at making timely payments

In India, there are three main credit bureaus. All of them consider above-mentioned factors before assigning a score on a scale of 900 to you. A high credit score can help you get highly competitive interest rate on your two-wheeler loan.

  • Make and Model of Your Vehicle

The make and model of the two-wheeler of your choice goes a long way in determining how much interest you will be paying on the loan amount. Since the particulars of the vehicle differ based on the model and manufacturer, lenders consider these factors before deciding on the interest rate. It is wise to choose a popular model of the vehicle as more lenders will be inclined to finance its purchase. Plus, dealers usually have tie-ups with lenders regarding financing specific models. So, make sure you discuss finance options with the dealer as well.

  • Loan Type

Many first-time borrowers are usually not aware of this; there are mainly two types of two-wheeler loans offered to borrowers in India. The first is a secured loan and the second is an unsecured loan. As the name suggests, in a secured loan you need to pledge an asset or collateral of equal or higher value than the loan amount, and in an unsecured loan you do not need to pledge any asset. Since the risk associated with a secured loan is typically low, lenders are more willing to reduce the rate of interest on the loan amount. Meanwhile, an unsecured loan may attract a higher rate of interest. Keep this in mind when you negotiate with the lender.

  • Down Payment Offered

Last but not least is the down payment you make towards your loan. Since lenders only finance a maximum of 85% to 90% of the total cost of your vehicle, the bigger the amount for your down payment the lower will be your rate of interest. Consider this when you sit down to strike a deal with your lender. Paying a higher down payment can help you enjoy the perks of a low interest rate.


Getting a two-wheeler loan from the right lender can not only help you purchase your dream vehicle, but will also make sure that you do not burn a hole in your pocket while doing so. Now that you know of the various factors that affect two-wheeler loan interest rates, maybe you can start the hunt for your dream bike.