Two wheelers are a lifeline in India, offering a convenient and economical mode of transportation for millions. But for many, buying a brand new two wheeler often requires financing through a two-wheeler loan. However, choosing the right loan options and interest rates can be tricky. A crucial factor that impacts the affordability of your loan is the interest rate. In this post, we’ll talk about the factors that influence the interest rates on two-wheeler loans in India and much more!

What Factors Influence Two Wheeler Loan Interest Rates in India?

Here are the factors that influence the interest rate you’re offered for a two wheeler loan calculator :

1. Credit Score

The foundation of your loan interest rate is your creditworthiness. This essentially boils down to your track record of managing debt and your ability to repay loans on time. Lenders assess this through your credit score, generated by credit bureaus like CIBIL. A higher credit score (generally above 750) indicates a responsible borrower and qualifies you for a lower interest rate. Conversely, a lower credit score suggests a higher risk for the lender, translating into a steeper interest rate.

Here’s how you can improve your credit score for a better deal:

  • Maintain a clean repayment history: Pay your existing bills and EMIs diligently. Missed payments or defaults severely impact your credit score.
  • Don’t be credit-hungry: Avoid applying for multiple loans or credit cards in a short period. This portrays you as financially stretched and can lower your score.
  • Maintain a healthy credit utilisation ratio: Don’t max out your credit cards. Ideally, keep your credit utilisation below 30% of your credit limit.

2. Down Payment

The larger the down payment you make, the lower the loan amount you need to borrow. This translates to a lower risk for the lender, who has less money to recoup if you default. Consequently, a higher down payment (ideally 20% or more) can significantly reduce your interest rate.

3. Your Financial Profile

Lenders also consider your overall financial health when determining your interest rate. This includes your income, employment stability, and existing debt obligations.

  • Income: A higher income indicates a greater capacity to repay the loan. Submitting income proofs like salary slips or bank statements strengthens your application.
  • Employment stability: Being employed with a reputable organisation for longer portrays financial stability and inspires confidence in lenders.
  • Debt-to-Income (DTI) Ratio: The ratio compares your monthly debt obligations (EMIs) to your gross monthly income. A lower DTI (ideally below 30-40%) indicates a manageable debt burden and improves your chances of securing a lower interest rate.

4. Loan-Related Factors

Beyond your financial profile, the specific details of your loan application also influence the interest rate.

  • Loan Tenure: Longer loan tenures (typically 3-7 years) spread the repayment burden but attract higher interest rates due to the extended period the lender’s money is tied up. Opting for a shorter tenure might lead to higher EMIs, but you’ll pay less interest overall.
  • Type of Two-wheeler: The loan interest rate can vary depending on the type of two-wheeler you choose. High-powered bikes or popular models with good resale value might attract slightly lower interest rates than less popular models.

Tips to Secure a Favourable Two Wheeler Loan Interest Rate

Here are some actionable tips to help you with a two-wheeler loan with a favourable interest rate:

  • Maintain a good credit score: Regularly check your credit report and address any errors. Practise responsible credit management by paying your bills on time.
  • Increase your down payment: A higher down payment strengthens your application and reduces the lender’s risk.
  • Compare loan offers: Don’t settle for the first offer you receive. Research and compare loan options from multiple banks, NBFCs, and two-wheeler manufacturers.
  • Negotiate the interest rate: With a strong credit profile and a good down payment, you can negotiate for a lower interest rate with the lender.
  • Consider a shorter loan tenure: While it might mean higher EMIs, it can significantly reduce the total interest paid.


By understanding the factors that influence two-wheeler loan interest rates in India, you can confidently navigate the loan application process. Remember, a good credit score, a substantial down payment, a stable income, and a well-researched loan tenure can significantly impact the interest rate you receive. Banks offer highly attractive two wheeler loan interest rates. So, if you want to calculate the amount of EMI you’ll pay, use a two-wheeler loan calculator to arrive at a well-informed decision.