Although two-wheeler loans are smaller in terms of the principal amount, they follow the same rules and regulations. In other words, if you are not eligible for the loan, you won’t be granted this financial benefit. Most people think that credit score or income stability is the only prerequisite they have to maintain to opt for a bike loan. While these two are important, they aren’t the sole determinants.
When you apply for a bike loan, you must consider all the factors to check your eligibility. Lenders can reject your application or impose an excessively high interest rate if there are credit risks in your application. That’s why we have compiled a detailed guide, explaining the factors you should consider to check bike loan eligibility in 2025.
What factors define the eligibility criteria for a two-wheeler loan?
Collateral or Guarantor
Sometimes, lenders can ask for collaterals as guarantors on the bike loan. It usually happens when there are high risks in your application in terms of failed repayment or missed EMIs. Collateral can be given in the form of property or fixed deposits. It will help lenders mitigate the risks associated with your credit application and ensure they can recover the full loan principal along with the interest through the same.
Debt-to-income Ratio
Every lender uses the debt-to-income ratio to check bike loan eligibility. It represents the portion of your annual income consumed to pay off the existing debts you have under your name. For instance, if your yearly income is INR 6,00,000 and you use INR 20,000 to pay off the debts, your DTI ratio will be 40%. It is considered quite high for a two-wheeler loan, thereby increasing the risks. It’s better to maintain it between 25% to 35% as per the market standards.
Loan Tenure
It’s important to consider the loan repayment tenure for better financial management and risk mitigation. In other words, you should check if the concerned tenure will help you navigate around the financial complexities well or not. For instance, if you want to reduce the monthly EMI, increasing the loan tenure is the best option. However, it will incur a higher bike loan interest rate. That is done to mitigate the risks often involved with longer repayment terms from the lender’s side.
Credit Score
One of the most important factors considered to check bike loan eligibility is your credit score. The numbers entail your credit history and actions taken to date. A few factors that have a direct impact on your credit score are:
- Timely payments of existing EMIs and bills
- Credit card utilization
- Total debt amount against your name
- Length of the total credit history
- Mix of credits
Usually, most lenders set a benchmark of 750 as the standard threshold for bike loan eligibility. So, if you have a credit score higher than this, your application is less likely to be rejected.
Loan amount and down payment
Choosing the correct loan amount is the key to improving your eligibility and maintaining the finances properly. Most lenders approve a loan amount of about 80% to 90% of the total two-wheeler cost. It will include the manufacturer’s price, insurance, and the registration fee. The rest of the amount should be given as a down payment to the seller. Now, the higher the loan amount is, the more will be your EMI for the same bike loan interest rate. If it doesn’t align with your DTI or credit history, your lender may consider you ineligible.
Documentation
Documentation is crucial for the loan application to get approved. You should submit all the required documents properly without missing a single thing. Below we have mentioned the list of papers that will help determine your eligibility for the loan.
- Age proof: You need to provide proper ID proof for your age.
- Address proof: Voter’s card, utility bill, or property paper can be used for address proof of your current residence.
- ID proof: You also need to submit a document to prove that you are an Indian citizen. For this, you can use an Aadhar Card, PAN card, Voter’s Card, or a valid passport.
- Income proof: Another important document needed to check bike loan eligibility is income proof. This will help your lender decide if you have income stability to pay off the loan on time or not.
Employment Status
If you are an unemployed individual, there is a high chance your bike loan application will be rejected. That’s because lenders check if there is a stable income flow for the applicant so that he or she can pay off the loan EMI on time without miss. So, you need to have proper employment, be it salaried or self-employed to become eligible for the bike loan.
Conclusion
These above-mentioned seven factors are the major determinants lenders will use to check bike loan eligibility. If any of the factors are not in your favor, your application can get rejected. Sometimes, lenders do not reject the application but impose high interest rates to mitigate the credit risks.
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