Two-Wheeler Loan vs Personal Loan - Choose the right one

If you’re planning to buy a new bike, then managing your expenses efficiently is an important part of the ownership journey. For instance, you need to evaluate if you can pay the entire amount in cash or take a loan. If your answer is ‘yes’ to the latter, then you may wonder what type of loan can serve you best. For instance, when considering between a Two-Wheeler vs Personal Loan, which one is right for you?

Two-Wheeler Loans explained

This is a secured loan by your bank for the loan purpose of purchasing a two-wheeler such as a scooter or motorbike. The bike, itself, serves as collateral in case you are unable to honour loan repayment. If you're wondering - can I use a Two-Wheeler Loan for personal use - the answer is "no".

Personal Loan explained

This is an unsecured loan issued by your bank to fund any expenses such as emergency hospitalisation, travel, or a product such as an appliance, mobile phone, or a two-wheeler.

Personal Loan vs Bike Loan: key differences

The key differences are as follows:

Collateral

This is an important aspect when considering between a Two-Wheeler Loan vs Personal Loan in India. The bike you buy will serve as collateral for a Two-Wheeler Loan. On the other hand, there is no collateral for a Personal Loan. Your credit score and income status will play an important role here.

Interest Rate

The interest of a Personal Loan is usually much higher, though a good credit score can create room for negotiation. A Two-Wheeler Loan interest rate is usually lower. A loan calculator can be useful for choosing the right one for you.

Tenure

You can pay back a Personal Loan between 12 and 84 months, whereas Two-Wheeler Loans must be paid back in 12 to 48 months.

Approval Process

You can apply for both types of loans online. For Personal Loans submit your KYC documents, loan application form, and income statements for three months. While in case of Two-Wheeler Loans, non income-based approval is also possible, since it is a secured loan. In both cases, your credit score will be considered. A score of 600 upwards is considered decent, while 750 upwards is excellent.

Amount

You can typically take a Personal Loan up to ₹40 lakh. On the other hand, your bank will sanction a loan amount that aligns with the cost of the bike, which on an average may be in the range of ₹80,000 - ₹1.25 lakh.

Ownership

When you take a Personal Loan and Two-Wheeler Loan, the products and services you purchase are owned by you. However, in a scenario where you are unable to repay a bike loan, the bank can take possession of the vehicle.

Personal Loan vs. Bike Loan: Features

Features of a Personal Loan

• This is an unsecured loan with no collateral.
• You can use the funds as per your needs.
• You can get access to a larger loan amount and lower interest rates with a higher credit score.
• Interest rates can start at 11.25%(however, this may vary from lender to lender)
• You must repay the loan between 12 and 84 months.
• The minimum loan amount is around ₹50,000.

Features of a bike loan

• This is a secured loan with the bike serving as collateral.
• You can use the funds only to purchase a bike.
• The loan amount is equal to the cost of the bike.
• You can secure a lower interest rate with a higher credit score.
• Bike loan interest rates can start at 10% (depending upon your choice of lender).
• You must repay the loan between 12 and 48 months.
• The minimum loan amount is around ₹25,001.

Also Read: Own your favourite ride with a Two wheeler Loan

Summing Up

If you are wondering which is better - a bike loan vs Personal Loan - be sure to understand the pros and cons before making a decision. If you specifically planning on purchasing a bike, then a Two-Wheeler Loan works as a custom solution.

Axis Bank offers competitively priced Two-Wheeler Loans, starting with a minimum loan amount of ₹25,001 and up to 100% on-road funding. The rate of interest ranges between 11.25% to 22% per annum based on the value of the loan, with a repayment tenure of 12 to 48 months. Apply online with minimum documentation and a seamless online application process.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.