What Are the Factors That Determine Two-Wheeler Loan Interest Rate?

Last Modified: 25-November-2022

Factors That Determine Two Wheeler Loan Interest Rate

Two-wheeler loans are the most convenient means of owning a bike without stressing your finances or depleting your savings. Bike loan schemes with zero down payment have made it easier to own a bike without having to pay a single penny immediately. Additionally, bike loans are convenient and can quickly be repaid at a flexible tenure at an affordable EMI. However, if you plan to get a bike loan, consider several things before applying for it. One among these is the interest rate.

Your bike loan interest rate is the main factor that determines your two-wheeler loan affordability. Even a slight difference in the interest rate can considerably bring down your loan installments and interest rates. Several factors determine the interest rates offered and understanding them will help you improve. So, this article aims to discuss several factors that come into play when deciding your two-wheeler interest rate. Understanding them will help ensure bike finance at lower interest rates.

What Are the Factors That Determine Bike Loan Interest Rate?

Down Payment

Down payment is the portion of the payment you will be paying above your loan amount to buy the bike. Most lenders finance only 70% of your bike loan, and the rest of the amount needs to be borne by you, which is the down payment. Though many lenders offer zero down payment loans, the interest rate will likely increase due to the risk factor involved. So, the interest rate provided to you depends on your down payment amount. However, you do not have to worry about that with Muthoot capital. We offer the lowest bike loan interest rate that you can quickly repay even when you avail of 100% bike finance.


Your income is a vital factor that helps your lender determine your interest rates. The net income you earn is compared against your bike loan EMIs to gauge the risk involved in lending the loan amount requested. Usually, most financial institutions offer a lower interest rate to a salaried individual as the income is steady and credible. However, with the Muthoot Capital bike loans, you can choose between the two loan schemes customized for making bike loans affordable to all, which are-

  • No income-based loans: the borrowers do not have to produce income documents to avail of this loan.
  • Income-based loans:┬áThis scheme offers you loans based on your income proof.

Type of Vehicle

While assessing your loan application, your vehicle type is considered to determine the interest rate. Interest rates depend on the cost of the bike that you choose. Luxury and high-performance bikes tend to have lower interest rates on high-value loans as the loan amount is higher. Also, the popular models attract higher resale value, making it easier for the lender to sell it and recover losses if you fail to repay the loan. This is why they attract lower interest rates.

Repayment Capacity

The repayment capacity of an applicant is compared to the EMI he has fixed. All current debts of the borrower are considered before determining the loan to value ratio calculation.

Loan Tenure

The loan tenure, if more, will also increase the bike loan interest rate. It is because lenders consider that a long time to pay back the loan will increase loan defaulting. Loan defaulting is regarded as a risk associated with the loan. Any loans that are deemed risky are charged higher interest to justify the risk and cover losses incurred. Therefore, to avail of lower interest rates, you need to consider a shorter tenure. But it is essential to exercise caution while choosing your term as shorter tenures lead to increased EMI, thereby overshooting your affordability increasing the chances of defaulting on your loan.

Using a two-wheeler EMI calculator, calculating your monthly EMI outgo will help you determine the optimum affordable EMI at the shortest tenure possible. This will help you contain the loan within your monthly budget while getting the best interest rate possible.

Employer Reputation

Employer reputation helps financial institutions to understand your job stability. A good employer like an MNC or a government-based job will earn you a lower interest rate as it increases your credibility.


You can lower interest rates on your two-wheeler loan by maintaining a good credit score and reducing your debt-to-income ratio. Alternatively, you can apply for a bike loan with Muthoot capital at a low-interest record rate of 0.99% per annum. With Muthoot Capital, you donÔÇÖt have to worry about lowering your interest rates or getting the best schemes for your bike loan. We have the best deals on two-wheeler loans in the market.

You can walk into our branch for detailed knowledge about getting bike loans at Muthoot Capital or call us at 1800 102 1616.

Also, Read- Best Way to Buy a Bike on EMI

About Author
Muthoot Capital Services Limited is one of India's most progressive financial companies. It is the part of Muthoot Pappachan Group which carries a legacy & trust of more than 133 years.
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