Personal Finance - Two Wheeler Loans, Bike Loans
Many banks and financial institutions are making available finance for purchase of Two Wheelers viz. Motor Cycles, Scooters, Bikes. You should look into and compare the offers of banks / financial institutions carefully. Some important aspects need to be compared are:
- Interest Rate: The interest rate to be charged by the Bank / financial institution
- Whether the interest will be applied on daily reducing balance basis or on maximum outstanding during the month. The interest application on daily reducing balance basis results in reduction interest load as the interest gets reduced from the date of credit of instalment in the account.
- Prepayment / Advance Payment Penalty : All banks usually charge penalty for prepayment of loan. However, the amount of penalty charged by different banks / financial institutions is different. You should look into this area carefully as you may, in future, desire to prepay or switch the loan to some other bank / financial institution for the reason of lower interest rates or any other reason.
- Processing / Application Handling Charges : These charges are also different for different banks / financial institutions.
The features, in general, of Car Loans available from banks are as under:
|Purpose||For purchase of a New Bike / Motor Cycle or a Scooter.|
|Amount of Loan||The amount of loan is determined by:
|Interest Rate||The interest rate applicable on car loans is usually linked to the Advance/ Lending Rate of the financing bank and varies with the change in Prime Lending Rate (PLR)/Advance Rate of the bank.
Some banks charge interest on daily reducing balance basis and some banks charge interest on monthly reducing balance basis. The charging of interest on daily reducing balance basis results in less interest load on the borrower.
|Processing fee and / or Application Handling Charges||The amount of processing fee / Application handling charges differ from bank to bank. Some banks charge a flat amount and some charge a percentage of the loan amount.|
Some banks also retain a portion of the processing charges/fee in case of rejection of the loan application by the bank.
|Type of Loan and Repayment||The loan is sanction as Term Loan. The repayment is allowed by way of monthly installments for a maximum period of 36 to 48 months.|
|Application||Application for the loan is required to be made on standard application form of the financing bank / financial institution.|
|Pre-sanction Documents||The application has to accompany the following documents:
|Post Sanction Disbursal Documents||After sanction of the loan by the banks undernoted documents are required to be executed/ furnished by borrowers to banks:
|Pre-payment / Advance Payment of Loan||All banks usually charge penalty for pre-payment of loan. However, the amount of penalty differs from bank to bank.|
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