If you have been doing some research on two- wheeler loans Bhubaneswar, you may have come across this term 100% financing. Also called no- down payment loans, these are on offer from most lenders in this market space. Before you can decide which kind of loan works best for you, you must understand these terms and also comprehend what they mean in terms of your monthly financial outgo as well as overall cost of the purchase or loan. Here is what you need to know about how a zero down payment two- wheeler loan is different from a regular loan.
What is down payment?
When you take a loan to buy your dream bike, you can opt for one of two modes:
- You pay some of the price upfront to the dealer and take your bike home, signing up for a loan to fund the rest of the purchase. You have a contract with the lender to pay back the balance amount via monthly payments called EMIs
- You take home the bike without paying a single paisa from your pocket towards its purchase price and the lender pays the entire amount to the dealer. You have a contract with the lender to pay back the entire price of the bike via monthly payments called EMIs. (There are other fees that you still have to pay out of pocket in both cases)
The amount that you pay to the dealer from your pocket is called the down payment, that is, the cash you put down on the table at the time of taking possession of the bike. In the second case, you don’t make a down payment because you have taken a zero down payment two- wheeler loan. In thiscase, your down payment is zero and the lender takes care of the entire purchase price.
Since the lender pays 100% of the price of your two- wheeler, the zero down payment two- wheeler loan is also described as 100% financing loan. There are advantages and disadvantages of this kind of 100% financing:
- You can decide to buy your bike today and complete the purchase as soon as you find the right zero down loan. You don’t need to arrange for finances to make your cash payment at the time of purchase
- You need not postpone getting a bike just because you do not have enough savings built up to manage a down payment. Leave it to the lender to take care of it all
- If your savings are locked up in high interest assets and loan interest rates are low, you need not break the savings and lose money. Instead, the lender can cover 100% of the bike purchase price
- No down payment means your loan amount is bigger. Bigger loans equal bigger monthly pay outs
- The larger the loan you take, the more you spend overall in interest payments over the term of the loan. In effect, the loan itself is costlier
- You may need to spread the loan repayment over a longer tenure to make the larger amount more manageable but this means you take on a financial liability for a longer term too
Taking 100% financing two- wheeler loans Bhubaneswar or going for a down payment option depends on your financial condition, the urgency with which you need the bike and also the terms and conditions that you can get for the loan. Often, lenders give seasonal discounts and offers such as low interest 100% financing loans, which can make it worthwhile to opt for a no- down payment purchase.
However, it is very important to understand the total out go in either case beforehand. Do your calculations well with the help of online calculators to see how your monthly EMIs differ if you choose to take the full purchase price as loan vs if you pay some of it out of pocket and only fund the balance price with a loan. Assess if you can afford the higher monthly EMIs on a sustained basis over the duration of the two- wheeler loans Bhubaneswar. Remember thatamissed or delayed payment can add penalties to the cost of your loan and failure to prepay can lead to repossession of your brand new dream bike.