If you are looking for a bike but shelling out a large sum for a new one seems like a challenge, choosing a second hand bike can be a smart decision. You can make it even easier on your pocket to go for a second hand bike loan instead of paying the entire money upfront. This will allow you to make monthly payments that you can easily factor into your budget. 

However, second hand bike loans come with an interest rate and other associated charges. Let us explore the costs associated with it. 

Types of interest rates 

• Fixed: These interest rates remain the same throughout the loan tenure and are pre-decided. Knowing the rate beforehand carries lesser risk and can help you plan the repayment accordingly. However, they may be higher than the variable rates.
• Variable: These fluctuate based on the market conditions and are decided based on the Marginal Cost of fund-based Lending Rate. This changes every time the RBI makes an adjustment in the repo rate and can go higher or lower. This increases the risk involved; however, there are lower than the fixed two wheeler loan interest rates. 

Factors affecting interest rates for a second hand bike loan

The following factors affect your two wheeler loan interest rate:

• Credit score: Your credit score is a quantitative measure of your creditworthiness. In India, the most widely accepted credit score is issued by CIBIL. It is a three-digit score between 300-900. It takes into account your credit history, repayment patterns, and credit management. Lenders typically need you to have a minimum required credit score to qualify for the loan. This can be close to 650 and above. However, if you have a high credit score, you may be able to negotiate a better two wheeler loan interest rate and get favourable loan terms.
• Level of income: Typically, lenders need you to have a minimum monthly income to be eligible for the loan. This helps them ensure that you are in a position to make timely EMI payments and that you will not default on the loan. Having a stable and regular income can fetch you lower two wheeler loan interest rates.
• Relationship with the loan provider: When getting a second hand bike loan, you should consider going to a lender who you already have a good relationship with. For instance, you can approach the bank where you already have a savings account. This way, the lender will have all your necessary details beforehand. Having a personal relationship with you, they may also be more assured about your creditworthiness and repayment capacity. Knowing this, they can offer you more flexible loan terms and a better two wheeler loan interest rate.
• Nature of work: Lenders look at your employment status and whether you are a salaried individual or self-employed. If you work for a reputable company or run a good business with stable profits and cash flows, you may be offered a better loan deal. 

It’s a wise practice to check the interest rate offered by different brands and NBF’s before availing the bike loan. Thoroughly evaluate and get a bike loan at a lower interest rate. This will provide you some relaxation in your monthly EMIs.

Other charges associated with a second hand bike loan 

• Prepayment charges: These charges may be levied by the lender in case you close your loan before the agreed due date. Foreclosing a loan can help you save a significant amount as you lower your interest burden for the months you prepay for. However, this is a loss for the lender, for which he may charge a sum. Make sure you ask your lender about these charges beforehand to avoid unnecessary trouble later.
• Processing fees: Processing fee is the amount charged by the lender to process your loan application. This is a one-time payment that you have to make at the time of applying for the loan. While your two wheeler loan interest rate may be low, if this charge is high, it can significantly alter the overall cost of your loan
  
• Part-payment charges: These are levied when you partly repay your loan. If you have an amount set aside, you can make a lump sum payment to bring down the outstanding principal amount, thus lowering the interest burden and your EMIs. Make sure to include this charge when deciding to make a part payment. Only do so if the benefit outweighs the cost.
• Other charges: These vary from lender to lender. However, some of the main charges include stamp duty, check bounce charges, documentation charges, legal charges, and loan cancellation charges. 

In conclusion

Getting a second hand bike loan can help you easily get the bike you are looking for. Make sure you assess all the associated charges and interest rates that come along with it. These differ from lender to lender, so research your options before choosing a loan that meets all your requirements.