3 min
04-March-2025
A two-wheeler loan provides financial assistance to purchase a bike or scooter, but sometimes borrowers may need to cancel their loan due to various reasons. Whether it’s a change in financial circumstances, dissatisfaction with the loan terms, or opting for a different financing option, understanding the process of cancelling a bike loan is crucial. Cancelling a loan involves specific procedures, eligibility criteria, and documentation requirements that borrowers must follow. Additionally, different lenders may have varying policies regarding loan cancellations, which makes it essential to be well-informed. If you're considering cancelling your two-wheeler loan, knowing the right approach can save you from unnecessary hassles and financial losses. In this guide, we will discuss why you might want to cancel your two-wheeler loan, the eligibility criteria for doing so, and the steps involved in the process. Keep reading to ensure a smooth and hassle-free cancellation of your bike loan.
High interest rates – If you realise that the interest rates on your loan are too high compared to other available options, you may want to cancel the loan and opt for a better deal.
Better loan offers – Some borrowers might come across another lender offering better terms, such as lower interest rates or flexible repayment options, prompting them to cancel their existing loan.
Loan disbursement delays – If your lender takes too long to disburse the loan amount, you might decide to cancel it and choose another financing option.
Change of purchase decision – If you decide not to buy a two-wheeler or choose a different model that requires different financing, cancelling the loan may be necessary.
Unsatisfactory loan terms – Some borrowers might not be comfortable with certain loan clauses, such as prepayment penalties or hidden charges, leading them to cancel their loans.
Full cash payment – If you manage to arrange the full amount in cash or get financial support from your family, you might prefer to cancel the loan and avoid interest charges.
Incorrect loan agreement details – If you find discrepancies in your loan agreement, such as incorrect EMI amounts or tenure, you may choose to cancel it before it gets finalised.
Early cancellation window – Many lenders allow cancellation within a specific timeframe after loan approval. Check with your bank or financial institution about their policy.
No agreement breach – If you haven't signed the final loan agreement or violated any loan terms, you are eligible to cancel the loan without major penalties.
No EMI payments made – If no EMI has been paid, lenders may allow cancellation with minimal or no charges.
Full prepayment facility – Some lenders offer loan cancellation if you agree to prepay the entire amount, including processing fees and applicable charges.
Sufficient reason for cancellation – Banks or NBFCs may require a valid reason for loan cancellation, such as a change in financial status or loan terms mismatch.
Proper documentation – Borrowers must provide necessary documents like loan approval letters, identity proofs, and cancellation request forms to complete the process.
Cancellation fee payment – Some financial institutions charge a processing or cancellation fee, which needs to be paid to proceed with loan cancellation.
Approval from lender – Even if you meet the eligibility criteria, final cancellation approval rests with the lender’s policies and discretion.
Refund of processing fees – In certain cases, lenders may or may not refund the processing fees after loan cancellation, depending on their policies.
Provide details of your two-wheeler loan account and express your intent to cancel the loan.
Request information on the process, required documents, and applicable charges.
Confirm any pending dues and pre-closure charges before proceeding.
If applicable, carry post-dated cheques (PDCs) issued for the loan.
Submit the original invoice of the two-wheeler if required by the lender.
Some lenders may require a written loan cancellation request, so prepare it in advance.
Make sure to obtain a receipt or confirmation of payment from your lender.
If you are paying via cheque or online transfer, keep a record for reference.
Some lenders may take a few days to process the final settlement, so follow up as needed.
This document serves as proof that you have no outstanding liabilities on the loan.
Check the details of the NDC to ensure accuracy before accepting it.
If applicable, update your vehicle registration details with the Regional Transport Office (RTO).
For more details on obtaining an NOC, refer to two-wheeler NOC.
Check for any pre-closure charges or penalties that may apply.
Consider the impact on your credit score before proceeding with cancellation.
If your loan was part of a bundled offer, ensure there are no additional costs.
Verify if the lender requires a cooling-off period before loan cancellation.
Be aware of processing timelines; some lenders take a few days to complete the process.
Ensure that all co-borrowers or guarantors, if any, are informed and involved.
Retain all documents and payment receipts for future reference.
If opting for a new loan after cancellation, compare interest rates and terms.
Check two-wheeler loan details for more insights.
Cancellation fees can range from 1% to 5% of the outstanding principal amount.
Some lenders may have a lock-in period during which cancellation is not allowed.
Any unpaid EMIs or overdue charges must be settled before initiating cancellation.
Processing fees paid at the time of loan approval are usually non-refundable.
If the loan is cancelled soon after disbursement, a proportionate interest charge may apply.
GST or other applicable taxes on fees and penalties must be considered.
Lenders may deduct administrative costs incurred before approving the cancellation.
If the loan was secured against collateral, additional charges for document retrieval may apply.
Always check the lender’s policy for cancellation terms before making a decision.
Why you might want to cancel your two-wheeler loan?
Financial constraints – Unforeseen financial difficulties can make it challenging to continue with loan repayment. If you find yourself struggling with EMI payments, cancelling your bike loan may be an option.High interest rates – If you realise that the interest rates on your loan are too high compared to other available options, you may want to cancel the loan and opt for a better deal.
Better loan offers – Some borrowers might come across another lender offering better terms, such as lower interest rates or flexible repayment options, prompting them to cancel their existing loan.
Loan disbursement delays – If your lender takes too long to disburse the loan amount, you might decide to cancel it and choose another financing option.
Change of purchase decision – If you decide not to buy a two-wheeler or choose a different model that requires different financing, cancelling the loan may be necessary.
Unsatisfactory loan terms – Some borrowers might not be comfortable with certain loan clauses, such as prepayment penalties or hidden charges, leading them to cancel their loans.
Full cash payment – If you manage to arrange the full amount in cash or get financial support from your family, you might prefer to cancel the loan and avoid interest charges.
Incorrect loan agreement details – If you find discrepancies in your loan agreement, such as incorrect EMI amounts or tenure, you may choose to cancel it before it gets finalised.
Eligibility for cancelling a two-wheeler loan
Loan not yet disbursed – If the loan amount has not yet been credited to your account or to the dealer, you can easily cancel it by informing your lender.Early cancellation window – Many lenders allow cancellation within a specific timeframe after loan approval. Check with your bank or financial institution about their policy.
No agreement breach – If you haven't signed the final loan agreement or violated any loan terms, you are eligible to cancel the loan without major penalties.
No EMI payments made – If no EMI has been paid, lenders may allow cancellation with minimal or no charges.
Full prepayment facility – Some lenders offer loan cancellation if you agree to prepay the entire amount, including processing fees and applicable charges.
Sufficient reason for cancellation – Banks or NBFCs may require a valid reason for loan cancellation, such as a change in financial status or loan terms mismatch.
Proper documentation – Borrowers must provide necessary documents like loan approval letters, identity proofs, and cancellation request forms to complete the process.
Cancellation fee payment – Some financial institutions charge a processing or cancellation fee, which needs to be paid to proceed with loan cancellation.
Approval from lender – Even if you meet the eligibility criteria, final cancellation approval rests with the lender’s policies and discretion.
Refund of processing fees – In certain cases, lenders may or may not refund the processing fees after loan cancellation, depending on their policies.
Steps to cancel your two-wheeler loan
Contact your lender
Reach out to your lender via customer service or by visiting the nearest branch.Provide details of your two-wheeler loan account and express your intent to cancel the loan.
Request information on the process, required documents, and applicable charges.
Confirm any pending dues and pre-closure charges before proceeding.
Provide necessary documents
Gather essential documents like your loan agreement, identity proof, and address proof.If applicable, carry post-dated cheques (PDCs) issued for the loan.
Submit the original invoice of the two-wheeler if required by the lender.
Some lenders may require a written loan cancellation request, so prepare it in advance.
Settle outstanding loan amount
Clear any remaining dues, including interest, late fees, and pre-closure charges.Make sure to obtain a receipt or confirmation of payment from your lender.
If you are paying via cheque or online transfer, keep a record for reference.
Some lenders may take a few days to process the final settlement, so follow up as needed.
Get a No Dues Certificate
Once the loan is settled, request a No Dues Certificate (NDC) from the lender.This document serves as proof that you have no outstanding liabilities on the loan.
Check the details of the NDC to ensure accuracy before accepting it.
If applicable, update your vehicle registration details with the Regional Transport Office (RTO).
For more details on obtaining an NOC, refer to two-wheeler NOC.
Things to keep in mind before cancelling your loan
Review the loan agreement carefully to understand the cancellation terms.Check for any pre-closure charges or penalties that may apply.
Consider the impact on your credit score before proceeding with cancellation.
If your loan was part of a bundled offer, ensure there are no additional costs.
Verify if the lender requires a cooling-off period before loan cancellation.
Be aware of processing timelines; some lenders take a few days to complete the process.
Ensure that all co-borrowers or guarantors, if any, are informed and involved.
Retain all documents and payment receipts for future reference.
If opting for a new loan after cancellation, compare interest rates and terms.
Check two-wheeler loan details for more insights.
Loan cancellation fees and penalties
Most lenders charge a pre-closure or cancellation fee based on the remaining tenure.Cancellation fees can range from 1% to 5% of the outstanding principal amount.
Some lenders may have a lock-in period during which cancellation is not allowed.
Any unpaid EMIs or overdue charges must be settled before initiating cancellation.
Processing fees paid at the time of loan approval are usually non-refundable.
If the loan is cancelled soon after disbursement, a proportionate interest charge may apply.
GST or other applicable taxes on fees and penalties must be considered.
Lenders may deduct administrative costs incurred before approving the cancellation.
If the loan was secured against collateral, additional charges for document retrieval may apply.
Always check the lender’s policy for cancellation terms before making a decision.
