Two Wheeler Loans

NMS · 2nd July 2013, 09:50

I have been in the Market for Car loans and was looking for various options other than the conventional Car Loan. In the process I came across the Loan Against FD thing as has already been suggested by GTO. I checked with Bank Of Maharashtra.
They give upto 90% of the FD amount as loan. The effective rate of interest at which you loose out is 1%. The max term for such an arrangement is 3 years.

Another option that could be explored is swiping the credit card for the balance amount and converting it to EMI's.

If you have an existing home loan it can also be extended by that amount easily.
I still feel Personal loans aren't the best thing in the market.

doctorque · 2nd July 2013, 11:25

Quote:

Originally Posted by vinair

It's for two wheeler. This guys deals with two wheelers.

And they fund only 70% of the cost (not sure if its on the on road price.)

9% interest rate is flat, its not on a reducing balance. Reducing will work out to twice as much in interest which is approximately 18%. Banks use flat interest rate to lure customers. HDFC will not offer 9% interest on reducing balance even as a car loan to someone looking at a lesser loan amount, say under 10lacs.

Getting loans at competitive interest rates to buy a motorcycle has been increasingly difficult.

gearbox · 2nd July 2013, 12:13

Any Loan instrument' interest rate is calculated with compounded interest and not simple interest. The banks always mis-interpret or communicate to the customer in SI and not in CI.

Lets take an example.

A and B both took a loan of 1 lac for one year, Person A took a loan on 7.90% Simple Interest and person B took loan on 14% compound interest.

Here is how their pattern or repayment will look like.

A will pay interest of Rs 658.33 each month i.e. 7900 for 12 months and after 12 months he would return or pay back 1 lac principal back to the lender, This means each month A is only paying interest and principal amount of 1 lac would be paid by A at the end of 12 months.

B on the other hand pays an EMI of 9000, and a portion of that EMI goes towards principal payment, So B pays about 1.08 lacs in 12 months, however at the end of 12 months he need not pay any principal since the principal was deducted out of the EMI. Effectively he also paid an interest same as "A" did, however it is a matter of how the interest rates were projected to each of these guys. Meaning SI or 7.90% equals to 14% CI, however banks always project the ROI in terms of SI and not CI.

Banks calculate with CI of 14% in mind and then re-calculate it with SI and project it to the customer, so a CI of 14% is essentially projected as 7.90% SI.

All interest rates quoted in the financial sector are CI Rates only.

This is wrong on the bank' part to not clearly mention the rate of interest @ compounded rates, and are projected in SI just to lure a customer.

djay99 · 2nd July 2013, 13:58

Quote:

Originally Posted by sandeepmohan

Stepped in to Vijaya Bank on my way back home. I need to have an account with them, they will issue a two wheeler loan only after six months post account opening and based on my transactions.

I am surprised. No such condition was mentioned when i enquired at JP Nagar branch.

KPS · 2nd July 2013, 18:01

Quote:

Originally Posted by gearbox

Any Loan instrument' interest rate is calculated with compounded interest and not simple interest. The banks always mis-interpret or communicate to the customer in SI and not in CI.

Lets take an example.

A and B both took a loan of 1 lac for one year, Person A took a loan on 7.90% Simple Interest and person B took loan on 14% compound interest.

Here is how their pattern or repayment will look like.

A will pay interest of Rs 658.33 each month i.e. 7900 for 12 months and after 12 months he would return or pay back 1 lac principal back to the lender, This means each month A is only paying interest and principal amount of 1 lac would be paid by A at the end of 12 months.

B on the other hand pays an EMI of 9000, and a portion of that EMI goes towards principal payment, So B pays about 1.08 lacs in 12 months, however at the end of 12 months he need not pay any principal since the principal was deducted out of the EMI. Effectively he also paid an interest same as "A" did, however it is a matter of how the interest rates were projected to each of these guys. Meaning SI or 7.90% equals to 14% CI, however banks always project the ROI in terms of SI and not CI.

Banks calculate with CI of 14% in mind and then re-calculate it with SI and project it to the customer, so a CI of 14% is essentially projected as 7.90% SI.

All interest rates quoted in the financial sector are CI Rates only.

This is wrong on the bank' part to not clearly mention the rate of interest @ compounded rates, and are projected in SI just to lure a customer.

Small correction Compounded Interest (CI) should read as Reducing Balance (RB) method. Basically it is SI charged on the reducing principal amount. Compounded interest means interest on interest

Actually two wheeler loans the rate of interest is a flat rate where interest is charged without considering principal repayment. Hence SI to be replaced by FT (Flat Rate)

Cheers

KPS

joshguy · 2nd July 2013, 22:03

Quote:

Originally Posted by sandeepmohan

This is on a personal or two wheeler loan?

My suggestion will be
1 -gold loan - no fixed emi's
2 - GTOs suggestion - FD loan
3 -personal loan

All the best

sandeepmohan · 2nd July 2013, 22:12

It looks like all doors are closed towards getting a good deal on a two wheeler loan. I don't have an FD anywhere to take a loan off it. I don't want to touch any of my long term investments to purchase a motorcycle. I have yet to speak to HDFC Bank, Citibank on personal loans. Will be doing this in the next few days. If nothing works and if I get a call tomorrow or in the next ten days that the bikes have arrived, I will have to cough up the additional interest and go with Bajaj Finance. I have no other go.

abeerbagul · 2nd July 2013, 23:07

Dont go for a loan against fixed deposit. This is like giving your money to the bank, so that they can loan it back to you and earn 2% interest on it!

If you have any mutual funds or shares in demat account, HDFC has a Loan Against Securities product. Here, you lock a certain amount of your shares / mutual funds and the bank creates a current account in which it puts 80% of your shares value.
Now you can use this current account with a debit card and cheque book. Interest on the outstanding balance is calculated daily and debited to the account every month.

Best part of this is no prepayment charges, you only pay interest on as much you use from the current account, and you can put back money as and when you get it.

This also works very well if you had purchased some shares which are now in loss, but you dont want to sell it off right now since you are looking for a rebounce in the long term. Dividends if any from these shares continues to accrue in your savings account even if the shares are locked.

sandeepmohan · 3rd July 2013, 21:33

Quote:

Originally Posted by djay99

No such condition was mentioned when i enquired at JP Nagar branch.

JP Nagar would be a bit too much for me to go back and forth.

What do you say to this two wheeler loan deal? It is lower than a personal loan.

https://www.centralbankofindia.co.in/Site/Interest.aspx

I am an account holder for over 25 years with Central Bank of India so getting a loan should not be a problem.

mh09ad5578 · 4th July 2013, 08:08

am in the same boat, having recently moved into my newly constructed home, my finances are nit strong but my heart's set,I am getting older for a bike like the ktm390 . it's now or never,with what I have read up think should try hdfc personnel loan. was denied any two wheeler loan by sbi. they said buy a car for the amount- nano, full amount instant sanction =-O weird!

djay99 · 4th July 2013, 09:28

Quote:

Originally Posted by sandeepmohan

What do you say to this two wheeler loan deal? It is lower than a personal loan.

https://www.centralbankofindia.co.in/Site/Interest.aspx

I am an account holder for over 25 years with Central Bank of India so getting a loan should not be a problem.

11.25% for a 2 wheeler is a very good deal. Also check if they have any cap on 2 wheeler amount. Many PSU banks have a limit of 50K or 1L.

djay99 · 4th July 2013, 23:08

All Punjab National Bank housing loan customers - you may get an over draft of upto 5 Lacs at Base rate which is 10.25% daily reducing basis. You can avail loan for any personal needs including vehicle purchase

.
I am their housing loan customer and planning to get OD account opened shortly.

Interest rate earlier was BR+3% which was coming to 13.25%.
Now they are offering at BR

.

kaushal21fb · 5th July 2013, 14:01

Go for Public Sector Banks. They usually have the lower rate of interest. It also makes sense to have at least 1 bank account (irrespective of no. of accounts with private banks) with the Public sector (SBI, PNB etc.) banks. It usually helps in securing a loan if you've an existing relation with the bank.

Also it makes sense to have the loan for shortest (financially) possible duration. Lot of banks offer short term loans @ lower interest. Beware there might be underlying cost though.
Last year I bought the Duke 200 and loaned about 60K from Bajaj finance. The loan was supposed to be 1 yr. 0% interest. But they charged me about Rs.2800 towards file and processing charges. And I was told about that on the date of delivery. I was infuriated and wanted to cancel the loan. But they'd sent the request for hypothecation. In the end I thought 2800 was a small amount to get my Duke on time.

sandeepmohan · 6th July 2013, 12:19

Quote:

Originally Posted by djay99

Many PSU banks have a limit of 50K or 1L.

You are right. Going by their website, Central Bank of India limit on two wheeler loan is 1 lac. I did not approach them as I do not have any documents at the moment that says I hold an account with them. All the papers are back in my home town. Besides; I don't think they will issue one going by the dead account activity.

I applied online at ICICI Bank and got this quote. Not too bad a deal. What do you say?

Loan Amount
Rs. 1,40,000
Total Interest
Rs. 12,028
Fees + Tax
Rs. 3,539
Total Cost
Rs. 1,55,567

Applied online with Citibank as I have a pay cheque account with them. An automated call came back and then said they are on vacation (they did not use the word vacation) today:-).

I just got back after a visit to Canara Bank. Maintain a savings account with them as well as a locker. Once again, Personal loan only if my salary account can be shifted to them (Yeah right). On asking for a two wheeler loan, the manager asked; why do I want one and what bike am I buying. Has asked me to come on Monday. All of this requires me to take time away from work. Thankfully; he said he's around the bank till 7pm. The bank happens to be just a km from home so will head to the back first thing once I am back from work on Monday and see what the manager can offer. I want to avoid a two wheeler loan due to the hypothecation process towards the end or is this no big deal?

I am most likely going to go with some private sector bank and I'll just have to cough up the additional interest. They seem a lot easier to deal with. With a PSU, I'm just running from one bank to the other and nothing is really happening.

imp! · 6th July 2013, 13:51

Quote:

Originally Posted by sandeepmohan

I applied online at ICICI Bank and got this quote. Not too bad a deal. What do you say?

Loan Amount
Rs. 1,40,000
Total Interest
Rs. 12,028
Fees + Tax
Rs. 3,539
Total Cost
Rs. 1,55,567

I want to avoid a two wheeler loan due to the hypothecation process towards the end or is this no big deal?

I am most likely going to go with some private sector bank and I'll just have to cough up the additional interest. They seem a lot easier to deal with. With a PSU, I'm just running from one bank to the other and nothing is really happening.

The effective total interest cost is about 11.12% which seems a good deal. Maybe you can try to negotiate the fees down a little.

If the total cost between private and government sector loan is marginal (depends, one can look at the difference as enough to pay for a new helmet or some other gear); I would go with Private sector bank. In my experience if the manager messes up or service is found wanting in private banks, all it takes is a threat to complain to their superior to get prompt and good service. In government banks, one can only expect good service if one is an old customer with good relations with the management, in such a case, the service is exemplary.

P.S Any word on the bikes yet?

Cheers!

imp!

2nd July 2013, 09:50	#16
NMS BHPian Join Date: Jul 2012 Location: Pune Posts: 141 Thanked: 56 Times	Re: Two Wheeler Loans I have been in the Market for Car loans and was looking for various options other than the conventional Car Loan. In the process I came across the Loan Against FD thing as has already been suggested by GTO. I checked with Bank Of Maharashtra. They give upto 90% of the FD amount as loan. The effective rate of interest at which you loose out is 1%. The max term for such an arrangement is 3 years. Another option that could be explored is swiping the credit card for the balance amount and converting it to EMI's. If you have an existing home loan it can also be extended by that amount easily. I still feel Personal loans aren't the best thing in the market.
	(2) Thanks

2nd July 2013, 12:13	#18
gearbox BHPian Join Date: Feb 2011 Location: Bangalore Posts: 185 Thanked: 119 Times	Re: Two Wheeler Loans Any Loan instrument' interest rate is calculated with compounded interest and not simple interest. The banks always mis-interpret or communicate to the customer in SI and not in CI. Lets take an example. A and B both took a loan of 1 lac for one year, Person A took a loan on 7.90% Simple Interest and person B took loan on 14% compound interest. Here is how their pattern or repayment will look like. A will pay interest of Rs 658.33 each month i.e. 7900 for 12 months and after 12 months he would return or pay back 1 lac principal back to the lender, This means each month A is only paying interest and principal amount of 1 lac would be paid by A at the end of 12 months. B on the other hand pays an EMI of 9000, and a portion of that EMI goes towards principal payment, So B pays about 1.08 lacs in 12 months, however at the end of 12 months he need not pay any principal since the principal was deducted out of the EMI. Effectively he also paid an interest same as "A" did, however it is a matter of how the interest rates were projected to each of these guys. Meaning SI or 7.90% equals to 14% CI, however banks always project the ROI in terms of SI and not CI. Banks calculate with CI of 14% in mind and then re-calculate it with SI and project it to the customer, so a CI of 14% is essentially projected as 7.90% SI. All interest rates quoted in the financial sector are CI Rates only. This is wrong on the bank' part to not clearly mention the rate of interest @ compounded rates, and are projected in SI just to lure a customer.
	(3) Thanks

2nd July 2013, 22:12	#22
sandeepmohan Senior - BHPian Join Date: Feb 2010 Location: Wellington Posts: 3,133 Thanked: 5,443 Times	Re: Two Wheeler Loans It looks like all doors are closed towards getting a good deal on a two wheeler loan. I don't have an FD anywhere to take a loan off it. I don't want to touch any of my long term investments to purchase a motorcycle. I have yet to speak to HDFC Bank, Citibank on personal loans. Will be doing this in the next few days. If nothing works and if I get a call tomorrow or in the next ten days that the bikes have arrived, I will have to cough up the additional interest and go with Bajaj Finance. I have no other go.
	() Thanks

2nd July 2013, 23:07	#23
abeerbagul BHPian Join Date: Dec 2007 Location: Pune Posts: 165 Thanked: 303 Times	Re: Two Wheeler Loans Dont go for a loan against fixed deposit. This is like giving your money to the bank, so that they can loan it back to you and earn 2% interest on it! If you have any mutual funds or shares in demat account, HDFC has a Loan Against Securities product. Here, you lock a certain amount of your shares / mutual funds and the bank creates a current account in which it puts 80% of your shares value. Now you can use this current account with a debit card and cheque book. Interest on the outstanding balance is calculated daily and debited to the account every month. Best part of this is no prepayment charges, you only pay interest on as much you use from the current account, and you can put back money as and when you get it. This also works very well if you had purchased some shares which are now in loss, but you dont want to sell it off right now since you are looking for a rebounce in the long term. Dividends if any from these shares continues to accrue in your savings account even if the shares are locked. Last edited by abeerbagul : 2nd July 2013 at 23:09.
	(2) Thanks

4th July 2013, 08:08	#25
mh09ad5578 BHPian Join Date: Oct 2008 Location: chitradurga Posts: 284 Thanked: 791 Times	Re: Two Wheeler Loans am in the same boat, having recently moved into my newly constructed home, my finances are nit strong but my heart's set,I am getting older for a bike like the ktm390 . it's now or never,with what I have read up think should try hdfc personnel loan. was denied any two wheeler loan by sbi. they said buy a car for the amount- nano, full amount instant sanction =-O weird!
	() Thanks

4th July 2013, 23:08	#27
djay99 Senior - BHPian Join Date: Jun 2007 Location: Ireland Posts: 1,475 Thanked: 544 Times View My Garage	Re: Two Wheeler Loans All Punjab National Bank housing loan customers - you may get an over draft of upto 5 Lacs at Base rate which is 10.25% daily reducing basis. You can avail loan for any personal needs including vehicle purchase . I am their housing loan customer and planning to get OD account opened shortly. Interest rate earlier was BR+3% which was coming to 13.25%. Now they are offering at BR .
	() Thanks

5th July 2013, 14:01	#28
kaushal21fb BHPian Join Date: Sep 2010 Location: Faridabad Posts: 75 Thanked: 117 Times	Re: Two Wheeler Loans Go for Public Sector Banks. They usually have the lower rate of interest. It also makes sense to have at least 1 bank account (irrespective of no. of accounts with private banks) with the Public sector (SBI, PNB etc.) banks. It usually helps in securing a loan if you've an existing relation with the bank. Also it makes sense to have the loan for shortest (financially) possible duration. Lot of banks offer short term loans @ lower interest. Beware there might be underlying cost though. Last year I bought the Duke 200 and loaned about 60K from Bajaj finance. The loan was supposed to be 1 yr. 0% interest. But they charged me about Rs.2800 towards file and processing charges. And I was told about that on the date of delivery. I was infuriated and wanted to cancel the loan. But they'd sent the request for hypothecation. In the end I thought 2800 was a small amount to get my Duke on time.
	() Thanks