In many of our earlier posts, we have considered big ticket loans (car loans, home loans etc). However, those starting their professional careers or those who have just stepped out of college may not really be looking for such big-ticket loans. They may be looking for much smaller loans to purchase products for lifestyle, convenience and mobility.
In this post, let’s look at a loan product that many young professionals may need. A loan to purchase a two-wheeler or a bike. I will pick up a couple of two-wheeler loan products from HDFC Bank.
HDFC Bank Two-Wheeler Loan: Features and Loan Eligibility
- Minimum Loan Amount: Rs 20,000.
- Maximum Loan Amount: Rs 1.5 lacs.
- Flexibility to select loan tenure from 12 months to 48 months.
- If you are an existing HDFC Bank account holder, you can get up to 100% finance on select models.
- 2% lower interest rate and 50% waiver on processing fee for existing HDFC Bank account holders.
- You must be salaried or self-employed. Well, you must have a source of income.
- Minimum age at entry: 21 years, maximum age at loan completion: 65 years.
- Minimum Gross annual income of Rs 72,000 for salaried and Rs 84,000 for self-employed.
- You must be working for at least 1 year.
- You must be staying in your current residence for at least 1 year. In case of a transfer, you will have to produce supporting documents.
- You must either have landline connection at home or office.
- You can apply for this loan online or through HDFC Bank branches or at the time of purchase through partner dealerships.
You can also check your loan eligibility by entering your details on HDFC bank website.
HDFC Bank: Super Bike Loan
HDFC Bank has another two-wheeler loan product. As I understand, this loan product is to purchase more expensive bikes. There is not much info about the product on the bank website. However, as I see, the eligibility should be the same as for regular two-wheeler loan product.
- Loan of up to 85% of the value of the bike.
- You can even avail funding of Rs 2 lacs for accessories. Must be an expensive bike.
- The maximum loan amount is not mentioned. However, given that you can get a funding of Rs 2 lacs for accessories, the maximum loan amount must be quite high (as compared to regular two-wheeler loan variant).
Clearly, since the loan is for more expensive bikes, the loan will be given to borrowers with income above a certain threshold (or else repayment will be a problem).
HDFC Bank Two-Wheeler Loan: Interest Rate
The current interest rate for the regular two-wheeler loan mentioned on the HDFC Bank website ranges for 11.61% to 22.37% p.a. The rate of interest mentioned for Super Bike two-wheeler loan ranges from 9% to 13.26% p.a. I am not sure why the rate for super bike loan should be lower. It is possible that this loan is offered only to borrowers with high creditworthiness, which is the reason for low interest rates. Though nothing is mentioned on the website, the rate of interest should depend on your creditworthiness. The rate may depend on your monthly income, credit score and the amount of loan (cost of the two-wheeler). As mentioned above, you get a 2% interest rate discount if you are an existing bank customer. Do note that rate of interest keeps changing. Check with the bank for the prevailing rates.
As you can see, the rate of interest is not very generous. If the rate of two-wheeler loan is quite high, you may even consider a personal loan. With a personal loan, you may get funding for the entire loan amount and you don’t have to worry about provide security either. The issue is that it is not easy to get a personal loan (since the loan is unsecured). In fact, for someone who is fresh out of college, a personal loan may not even be an option.
What Are the Other Charges?
Processing fee is quite high at 3% of the loan amount. By the way, 3% is the maximum. This charge may be subject to negotiation. As mentioned earlier, existing HDFC Bank customers will get a discount of 50% on the processing fees. Similarly, documentation charges will be a maximum of 3% of the loan amount.
HDFC bank charges prepayment penalty too, as follows:
- Prepayment is not allowed in the first 3 months.
- 10% of principal outstanding if you prepay within 4 to 6 months of 1st EMI.
- 6% of principal outstanding if you prepay within 7 to 12 months of 1st EMI.
- 4% of principal outstanding if you prepay within 13 to 24 months of 1st EMI.
- Post 24 months, 3% of principal outstanding.
GST is applicable on all the charges.
Do You Have to Provide Any Security?
The two-wheeler will be hypothecated to the bank. And this should suffice. However, if the bank is not very comfortable with your repayment ability, it may ask for additional security or insist on a guarantor.
What Documents Are Needed to Apply for Bike (Two-Wheeler) Loan?
You will have to provide identity and address proof. In addition, you have to provide income proof too. Salaried can provide salary slips while the self-employed can provide the latest income tax return copy. For the complete list of the documents, please refer to the documentation page for HDFC Bank Two-wheeler loan page.
The documentation requirement (and eligibility for the HDFC Bank Super Bike Loan may be a bit stringent. The document list for Super Bike loan includes repayment record. By the way, I am not sure what this means.
What Should You Do?
If you must purchase a bike with a loan, go ahead. Just ensure that you can pay EMIs on time. When you are fresh out of college, it is not easy to get hang of your expenses. Almost every lifestyle product or a fresh fashion label seems indispensable. You don’t want to commit a big portion of your income towards your two-wheeler EMI. Be prudent. Consider options from other banks and NBFCs and figure out the product the lowest cost and charges and high flexibility.
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