Fancy a Hayabusa or Indian Chief? Tailor-made loan can make it yours

Do you dream of zipping around on a luxury bike but can't afford one? Don't let the lack of finances hold you back. With banks offering loans specifically for super bikes, you can own a fancy set of wheels, too.

These loans offer higher amounts than your regular two-wheeler loans. While some lenders may insist on insurance, other conditions may be easier to meet. Let us see in detail how these loans work.

Loan amount, tenure

Adhil Shetty, CEO, BankBazaar.com says that since the loan required for super bikes are normally larger than regular two-wheeler loans, banks may offer it as a separate standalone product with a different eligibility criteria.

Given that the cost of super bikes can run into a couple of lakhs of rupees, the loan amounts start at Rs 1-2 lakh, as against a regular two-wheeler loan which starts at around Rs 30,000.

For instance, Bank of Baroda, which is the latest entrant in this segment, offers a loan of up to Rs 10 lakh for super bikes. "Though this is a premium segment, the growth in this segment is as much as 70%. The customer segment is likely to be those who already own luxury or premium cars. We have extended the limit on our existing two-wheeler loan up to Rs 10 lakh for super bikes. We could also consider higher loan amounts There are bikes that cost as much as Rs 5 lakh or Rs 8 lakh. But we expect good repayment since customers are premium customers,'' says V K Sethi, general manager, retail banking, Bank of Baroda.

The average size of the bank's regular two-wheeler loan is Rs 80,000-Rs 1.25 lakh. In case of super bikes, the operating units have the authority to sanction loans up to Rs 10 lakh.

"We also consider a two-wheeler loan beyond Rs 10 lakh based on the borrower's credit profile,'' Sethi says.

Similarly, in the case of State Bank of India, for regular two-wheeler loans the available loan amount is between Rs 30,000 and Rs 2.5 lakh, while for the super bike scheme, the loan amount starts at Rs 2.5 lakh, according to the bank's website. The margin, too, is lower for the super bike scheme. It is 15% for super bikes, while for regular two-wheelers it is 25% of the on road price of the vehicle. At SBI, for high salary package/ high net worth individuals/ wealthy customers, up to 90% of funding is available. For super bike loans, the maximum repayment tenure is higher at five years, while for regular two-wheeler loans it is three years.

Axis Bank also offers super bike loans up to 85% of the on-road price for a tenor of two to five years. "We give super bike loans on bikes with 500cc and above only. The customers are predominantly male, aged between 35 and 45 years from Metro and Tier I or II cities,'' says Jagdeep Mallareddy, head - retail lending and payment. The bank also offers an additional 8% funding on accessories invoiced at the time of delivery, according to its website.

Interest rate, eligibility

While Bank of Baroda offers the same rate (12.65%) for both two-wheeler and super bike loans, SBI charges a lower rate for super bike loans. The bank charges 11.8% for super bike loans and 17.6% for two-wheeler loans. Axis Bank charges 12-14% for super bike loans.

Shetty says, "Interest rate varies from bank to bank. It may range around 10.5% to 24% per annum.''

Due to the higher ticket size loan for super bikes, a lender may set a higher income eligibility in comparison to a regular two-wheeler loan. "Interest rates are linked to the loan amount as well as the borrower's credit profile. A good credit score – 750 or higher – will help you get the best loan offers. Since the loan amount for a super bike loan is higher the bank may allow a loan only if you have sufficient income to repay the EMIs,'' Shetty says.

Bank of Baroda, for instance, insists on a credit life insurance for borrowers in case of super bike loan, if the amount is more than Rs 3 lakh. A credit life insurance is life insurance taken in the name of the borrower so that in case of any mishap the loan can be paid off. Banks usually insist on such an insurance for home loans, given the higher loan amounts and longer repayment tenures.

"In case of super bikes, since the potential customers are youngsters, there is a concern that they could be prone to accidents or unforeseen circumstances. So, the loan is meant to cover that," Sethi says.