June 4, 2024

What Are The Main Factors That Affect Bike Loan Interest Rates?

Getting a bike is the best way to navigate through daily traffic. Besides, with the current social-distancing norms of the COVID-19, a two-wheeler allows you to protect yourself from contracting the deadly virus. Buying a bike from your pocket may put a burden on your finances. However, you must not give up on your dream of owning a bike. 

If you are short of funds to buy a bike, you can apply for a two-wheeler loan. The best part is that you do not have to pledge your valuable asset as collateral. Your lender may offer you up to 100% of your preferred bike’s on-road price as a loan. It also comes with affordable interest rates and flexible loan tenure, allowing you to make timely repayments. However, your interest rate depends on factors such as age, credit score, income, current financial obligations, etc. 

Here are the top factors affecting the two-wheeler loan interest rates:

  • Loan amount

Your loan amount has a direct impact on your bike loan interest rate. Your lender may offer you up to the entire value of your bike as a loan, but it does not mean that you should opt for it. Know that your lender will charge a higher bike loan interest rate if you opt for a higher loan amount. They usually do that to justify the risks involved. If you have the budget or surplus amount in your bank account, make sure to pay a certain amount of the bike from your pocket. 

Also, it is advisable to use a two-wheeler loan calculator to determine your affordability. The two wheeler loan calculator enables you to choose a loan amount and loan tenure based on your needs. 

  • Loan tenure

Another factor in your two-wheeler loan calculator that greatly influences your interest rate is your loan tenure. Generally, your lender may allow you to choose a loan tenure ranging between 12 to 48 months, but you must choose one within which you can repay your loan. If you opt for a longer loan tenure, your lender will charge a higher bike loan interest rate.  So, if you wish to secure a lower interest rate, you may want to opt for a shorter loan tenure. 

  • CIBIL score

Your credit score is another factor affecting your bike loan interest rate. It enables lenders to determine whether or not you can be trusted with a two-wheeler loan or a lower interest rate.  It shows if you are a creditworthy borrower. It is a three-digit number calculated based on your credit history, length of credit history, credit utilization, credit mix, and new credit. 

If you want to secure a lower bike loan interest rate, you may want to maintain an excellent CIBIL. The minimum CIBIL score requirement is 750. The closer you are to the 900 range, the greater your chances of securing a lower interest rate. 

  • Type of two-wheeler loan 

You will have two options to opt for while applying for a two-wheeler loan – a secured loan and an unsecured loan.  A secured loan is a type of two-wheeler loan that requires you to pledge your asset as collateral. Keep in mind that your asset’s value must be equivalent to or more than the sanctioned loan amount.  An unsecured loan does not have such requirements. You can get a loan without pledging anything as collateral.  

Your two-wheeler loan also depends on the type of two-wheeler loan you choose. Compared to unsecured loans, a secured loan comes with a lower interest rate, as the lender is assured of recovering the loan amount if you defaulted. 

  • Location of dealership 

It is a known fact that the price of the same model of a bike varies across different dealerships. For example, the price of a RE Himalayan 500 cc is different in Ladakh than the price in Manali. The affecting the final prices are the location of the dealership, local taxes, and delivery costs. 

It is worth noting that the price of your bike has a direct impact on the total loan amount. If your preferred bike is expensive, then your loan amount will also be higher.  A higher loan amount brings with it a higher interest rate. So, if you want to avail yourself of a lower interest rate, it would be wise to find a dealership that offers a lower price for your bike. 


Getting a two-wheeler loan is the best way to own your dream bike and yet be able to manage your finances without putting any burden on your monthly budget. Before applying for a two-wheeler loan, make sure to use a two-wheeler loan calculator that allows you to determine your affordability within just seconds.