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The owning of a bike or a scooter is a thought that crosses one’s mind at some point of time. One may find the time taken to commute from home to office too long. The uncertainty of public transport and lack of night time services may drive one to seek that two wheeler loan. One’s son has just reached college and the thought of gifting him a bike on his eighteenth birthday is on one’s mind. Whatever be the reason one needs a two wheeler, the demand for two wheeler loans is growing in India and banks are doing their utmost to cater to this need. Attractive financing, slashing of the interest rates and festival discount offers are doing the rounds.
A two wheeler loan can be a secured loan or an unsecured loan. If one opts for a secured loan then a collateral needs to be pledged. A lower rate of interest is charged for a secured loan than for an unsecured loan. In the case of an unsecured loan 10-15% of the value of the two wheeler needs to be made as a down payment to the bank at the time of purchase. A higher rate of interest is charged as this loan is unsecured in nature.
In India festive seasons boost the demand for the purchase of two wheelers. The season of Diwali and other major festivals sets the sale of two wheelers on fire and huge profits for their parent Companies .In a downturn or a recession the trend is different and demand needs to be pumped up as observed in recent times. The finance minister recently asked banks to cut interest rates on auto loans. Banks and non banking finance Companies had obliged by cutting the rates for the festive season for a short period of time. Banks have cut interest rates on two wheeler loans by 0.2-1.0% .Many banks have slashed their loan processing fee by half. Certain banks have completely waived off the loan processing fee as well as the documentation charges. Do these festive offers need to be taken with a pinch of salt? Yes, one certainly cannot take up these loans blindfolded .Along with the interest rate cut as well as loan processing fees being waived off taking a look at the other charges such as documentation ,administration, loan clearance as well as valuation charges needs to be done. Before opting for the two wheeler loan one must read the fine print carefully and do all the necessary calculations to be sure of getting the best deal.
Good monsoon is a major factor which props up sales of two wheelers in India. Earlier motor cycle and two wheeler Companies focused heavily on urban customers neglecting rural demand. This trend soon changed with two wheeler Companies focusing on the untapped rural base. With a bountiful monsoon and cash in plenty from rich harvests farmers form a huge customer base. Backed by proof of income farmers can easily get a loan sanctioned. Two wheeler Companies realize this and a number of bikes are specifically designed for the rural market. Bikes which are sturdy and tough are designed for the rural customer. Major bike Companies can no longer lose focus on the rural segment with nearly 40% of sales coming from them. With distribution channels being ramped up in the rural areas as well as active service and maintenance support being provided sales in these areas are picking up. With sales in the urban area plagued by high retail inflation and high fuel costs the rural segment is providing timely aid to the two wheeler Companies in India. This props up dealer based two wheeler financing and the banks two wheeler loan segment.
The tie up between Motor cycle Companies in India and banks promises attractive benefits to the customer and is a win win situation for all the parties involved. The down payment on the two wheeler loan is much lower in case of a tie up. The loan processing is faster, documentation easier and the tenure of repayment is longer. The tie up between banks and motor cycle Companies takes full advantage of the festive seasons. Easy financing with rates as low as 7-8% is offered by motorcycles Companies in tie ups with banks. Motorcycle Companies see huge sales, banks get new customers and the customer is treated to a wide range of two wheeler models at competitive rates of interest on his loan .It can’t get better than this.
Banks being plagued by high non performing assets are very careful when lending in the two wheeler segment. Borrowers who do not match up to the very high standards set by banks turn to non banking finance Companies to finance their two wheeler purchases. The EMI’s are slightly higher but customers do not mind paying the slightly higher amounts which could be a few hundred rupees more a month. Many non banking finance Companies even refund a small percentage of the EMI’s paid at the end of the year if the borrower is prompt with the payments. Non banking finance Companies are present where banks do not like to venture mainly the rural areas. These non banking finance Companies focus on areas very close to their branch of operation so that they can provide optimum services.