While credit participation is relatively low in two-wheelers compared to four-wheelers, taking out a loan can be beneficial in the long run.
Two-wheelers are the most popular mode of personal transportation chosen by the common man in India. The reasons are affordability, easy navigation in traffic, low maintenance and upkeep costs. According to some reports, the average time spent by a person on a two-wheeler to reach a destination is almost one-third that of a four-wheeler (in our congested metropolitan cities).
There are basically two types of two-wheeler users in India: the pendulum buyer who needs a two-wheeler to get from point A to point B (the choice here is usually one displacement from 100 to 150 cm3) and the ambitious buyer who has a desire to own a two-wheeler not only to move but also to display or simply feel good (150cc and more).
Due to the pandemic and social distancing standards, a large portion of the population has switched from public transport to two-wheelers. But when buying two-wheelers, new or old, the credit participation is relatively low compared to four-wheelers. Should you finance it or should you pay the full price up front? Here we are discussing whether choosing an IME or taking out a loan is like icing on the cake if you are thinking of buying a dream two-wheeler. The reasons are:
Increased purchasing power: since full payment does not need to be made at the time of purchasing the two-wheeler, the purchasing power of the buyer increases, giving him the possibility to choose the best bike on the market because it has extra money to spend to be paid in installments.
Acts as a financial relief: Paying the full amount up front can literally put a dent in your pocket as your savings may be depleted. The unexpected can arise at any time. On the contrary, opting for low interest rates and EMI can save you money which could be used in an emergency.
Low interest rates: Banks and NBFCs (non-bank financial corporations) compete with each other to offer reasonable interest rates. Rates can start from 7%, up to 18% and above, depending on the term you choose (the ideal term is two years). Keep in mind that the interest rates for two-wheelers are comparatively lower than for personal loans.
Instill a habit of saving: Since you know you have taken out a loan, you would be required to keep part of your salary to meet the IMEs, thus instilling a habit of saving; these savings can be invested in areas like stocks.
Instant Loan Approval: The queues for loan approval and the tedious process of submitting documents are reasons people are reluctant to take out vehicle loans. But there are plenty of start-ups and banks that accept applications and documents online, making it easy and straightforward for buyers. If you meet the eligibility criteria set by banks and NBFCs, as well as a good credit profile, your loan can be disbursed within hours of applying.
Tax advantages: If you are self-employed, you can benefit from tax advantages in the form of tax deductible interest. Buying a two-wheeler on behalf of your business can save you money on fuel, insurance and even maintenance as these can be presented as deductibles from the company’s profit. .
Author: Sumit Chhazed, co-founder, OTO Capital
Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or its employees.
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