Zero Down Payment Two Wheeler Loan – Know the Pros & Cons of It

With the concept of financial assistance in the picture, the burden on a common man has declined to an incredibly great extent. Not only can you cover sudden medical expenses or planned educational fees under the funding received from lenders, but even your dream of purchasing a two-wheeler can be accomplished with the loan.

Whilst organisations usually kept it mandatory for the borrowers to make down payments for availing funding at a specific bike loan interest rate, with time, the concept has undergone numerous changes. Gone are the days when you would have to accumulate funds even for borrowing money. The moment the era of zero down payments stepped in, more and more people are getting drawn towards availing a loan without any difficulty.

What Is A Zero Down Payment?

Before understanding zero down payments, let us first brush us with what exactly are down payments. Generally, when a person avails a loan, he/she is required to pay the upfront, that is, provide the lender with at least 5% to 15% of the value of the bike. The bank would then give you the remaining portion as a loan.

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But in zero down payments, the borrower is not at all required to pay upfront. One can get 100% funding, meaning the down payment is zero. You can get all the details from Bajaj Auto Finance.

Are The Zero Down Payments Worth It?

The more overwhelming the concept of zero down payments seems, the more imperative it becomes to draw the line between its advantages and disadvantages. It is well-known that even convenience has a price tag and the saying couldn’t fit anywhere better but zero down payments.

Before unravelling the downside, let’s explore the benefits a zero down payment extends to its borrowers:

High-Value Loan Amount

The most significant advantage of a zero down payment for bike loans is that you can purchase expensive bikes without paying upfront as security. You no longer require to provide the lender with a particular portion of the value your bike holds to prove your reliability. 

More Cash In The Hand

Since no down payment is needed, you will have more funds in hand for other expenses. This is why zero down payments are being preferred because people do not want to spend their last dime on a bike rather than saving it for an emergency. 

Prevents Prolonging The Purchase

Zero down payment allows you to buy the bike at any time and postpone your plans because of other expenses. 

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The Downside

Higher Interest Rates

What people are not aware of is that even zero down payments are not cheap. Instead, it can be more expensive than the total amount you spend when making a down payment. The reason being that the interest rates of the loan amount, when taken on a zero down payment, is much higher than the other case since you are considered as a high-risk borrower.

Higher EMIs

Besides more interest rates, what adds up to the Equated Monthly Instalments (EMIs) is the higher value of your loan amount. In case of down payments, you are required to repay EMI only on the portion that the lender provides you. But in this case, you have to pay EMIs on the entire loan amount.

Conclusion

In a nutshell, one must research and plan out thoroughly before moving forward with zero down payments. Although, no doubt, they can be highly beneficial when you want to keep some cash in your hand instead of spending the entire lot in making down payments. But, one must remember that with time, the value of the loan to repay will be much more and hence, the required preparations must be met beforehand.

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navneetsharma

I am a financial analyst. I have done MBA in Finance. I have worked extensively in the finance sector along with many organizations.