Bought a bike on loan but don't need it now? Here is what you can do

Returning a newly purchased, financed bike is not a straightforward affair. There are various parties involved, and it requires a couple of steps before the buyer can return it. However, the relief is you have some options open. 

Buying a two-wheeler, especially the first bike, is an emotional affair for many of us, but at times you regret the decision soon after you have made the purchase. This happens to the best of us when we buy something only to release that we don't need it, as much as we thought we would, and we would like to return the product. Only this time, there are multiple stakeholders - the dealer who sells the two-wheeler, the company or bank who finances the motorbike, the insurance company insuring the bike, the RTO who registers the vehicle ownership, and the buyer (you)  

Let us take you through some possibilities with various scenarios and what you can do in each of these cases:  

Bike purchased but there is some fault

As soon as you purchase the vehicle and go for the first few rides, you realise there is some defect. Be it the gear-box or tyre alignment or something to do with the engine, these types of faults typically come under manufacturer warranty, and you can get these corrected.  

You should immediately let the dealer know about the defect and urge them to correct it. The dealer is obligated to either fix the fault by replacing the part or if the part is irreplaceable, then the company will replace the bike. In all scenarios, the dealer will give you details on your complaint’s status and the expected time to solve it. But you should regularly follow up with the dealer.  

Whatever the solution may be, but you are entitled to a defect-free two-wheeler. However, this is possible under the warranty period only. Some of the faults should be reported immediately, and remember, the fault should be a manufacturing defect and not an accidental one.  

Bike purchased with a loan but you don’t need it now

This is the most common and a little process-oriented scenario. Now, given that the two-wheeler was bought with the help of a loan, you are first liable to pay the loan amount to the bank or the company issuing the loan before you become the legal owner of the vehicle. Yes, if you purchase a bike with the help of a loan, legally, the financier is the owner of the two-wheeler until the amount is fully paid (as per the agreement), and you are given the freedom to use the vehicle until that time. And you can only sell something which you own! 

So you see the dilemma now, let us explore your options in this case: 

1. If you sell the bike before the closure of the loan account, it is a crime on your part, and the finance company can sue you or file a police complaint. This is a hassle, and you should not consider taking this option.
2. When you purchase a vehicle on loan, normally, “Lien” on behalf of the bank or loan issuing company will be noted in the registration certificate (RC) book.
3. If you have decided to sell the bike, you must first clear all the due EMIs and close the loan account. When you foreclose a loan, it means repaying the outstanding principal amount in one single payment instead of regular monthly EMIs. 
4. Once the entire amount is paid, the next step is to get a NOC or no-due certificate and present it to the RTO. The RTO office will then cancel the lien in the RC book. This completes the process of ownership legally. 
5. Now you have become the vehicle’s legal owner and can sell the bike to a new buyer. 

This brings us to another set of challenges, repaying the loan amount when you are running low on funds. There are some possibilities here as well which can help you:

1. If your new buyer can offer to make an advance payment, this amount can be used to settle the loan and foreclose the loan account. If needed, you may complete all the processes looping in the new buyer so that there is transparency.
2. There is one more possibility, but it is rarely practised. This is particularly helpful when your new buyer is also running short on funds and cannot make an advance payment. Some banks or NBFCs finance second-hand vehicles as well, so there is a possibility that the new buyer you are selling the vehicle to, avails a loan that you can use to clear your existing dues.  

The most important part of this whole process is the ownership of the vehicle. Once you become the owner, you can sell the bike, transferring all the vehicle-related documents, namely, RC book and insurance (if you have one), in the name of the new buyer.  

Now you know how you can sell the bike under an active loan, and while you have started to plan the next steps, it is important that you know about the prepayment of the loan. While prepayment of a loan is possible and helps you sell the vehicle, it also helps you save on interest. This is particularly not good business for the finance company because it means they are losing on business. Therefore, most lenders allow for prepayment of the loan with some prepayment charges.  

How to prepay the loan

You need to get in touch with the finance company via email or call the customer support centre. They will guide you on the next steps, which generally are:

1. First, you need to check if you are eligible for prepayment.
2. Once you have crossed the lock-in period and can prepay, you need to know the total due amount as on the date.
3. The lender will also let you know the prepayment charges. Once you confirm to go ahead, you will receive the intimation with all details via email. 
4. You have to acknowledge that email and repay the loan amount.
5. Once the loan has been paid and verified, you will receive a NOC or no-due certificate.
6. You can show this certificate to the RTO to update the RC book.

At Shriram City Finance Company (SCFU), we offer different tenure for a two-wheeler loan. The duration can range from 12 to 36 months. You can foreclose a two-wheeler loan after paying just 6 EMIs. Minimal foreclosure charges are starting from 4%, depending on the loan scheme you have opted for.

The process to get a bike loan at Shriram City is easy with the application process in multiple languages with minimum documentation required. The loan approvals are quick, disbursement is instant, and the process is entirely online. You can read all about the eligibility, documentation required and charges here. You can apply for the loan here. While you can get the loan at any credit score, we advise you to keep a healthy credit score to get the best interest rates.