Personal Loan vs. Bike loan

Are you planning to buy a bike but wondering which is the best option between personal loans and bike finance to fund the same?

Today, there are varieties of loans available to meet different kinds of needs such as home loans, auto loans, education loans, etc.

But personal loans are unique as they can be used for a variety of reasons, including purchasing a bike or two-wheeler.

In such a scenario, which is the better option - Personal loans or bike finance?

Personal Loan vs. Bike Loan - Which One Should You Choose?

Let us understand the features of each of these loans first, in order to find out which one is the better option.

Features of a Personal Loan

A personal loan is an unsecured short term loan that can be availed by an individual from different lenders like banks, NBFCs, or online fintech lenders.

The eligibility criteria and documentation requirements for availing a personal loan are less stringent compared to other loans such as home loans and education loans.

Personal loans do not require security or collateral making them easy to avail. However, interest rates may be on the higher side due to this factor.

Features of a Bike Loan

A bike loan or a two-wheeler loan, on the other hand, is a secured loan. This loan can be availed only against the security of a two-wheeler.

The asset (bike/two-wheeler) remains hypothecated with the lender until the loan is repaid in full.

Earlier, tenures of bike loans were the same as personal loans, however, these days extended tenures are becoming more common.

The loan amount that can be availed is higher as compared to personal loan but the eligibility conditions for a bike loan or bike finance are generally more stringent.

Personal Loan vs. Bike Loan - At a Glance

Based on the features mentioned above, let us compare the two loans -

Feature	Personal Loan	Bike Loan
Versatility	Can be used for anything as long as it is legal	Only for purchase of a two-wheeler/bike/scooter
Loan Amount (varies based on the lender)	Anywhere between Rs 5,000 to Rs 5 lakh	Restricted to the price of the bike
Down Payment/Collateral	No down payment/collateral/security required	Down payment of 10-20% of the on-road cost of the two-wheeler may be required The bike in question will be considered as collateral
Interest Rate (varies based on the lender)	Starts at 16% p.a.	From 9.55% onwards p.a.
Tenure of the loan	Generally up to 5 years	Extended tenure of 7 years allowed
Eligibility Criteria	Comparatively relaxed	Comparatively stricter
Documentation Requirements	Minimal	May require more documents
Lenders	Banks, NBFCs or online lenders	Only from Banks or NBFCs
Time and Ease of disbursal	Very easy when a personal loan is availed from an online lender. Approval and disbursal in shorter amounts of time	Longer duration for disbursal. May require coordination between the dealer and the lender.
Ownership of the bike purchased	With the buyer always	Bike ownership remains with the lender until the loan is repaid in full.

Which is the Best Option between a Personal Loan and Bike Finance?

Based on the table above, we can see that both loans have their own advantages and disadvantages. While personal loans are easier to avail, the interest rates may be on the higher side as compared to bike loans.

Bike loans come with longer repayment terms but if you miss your repayments, the bike may remain in possession of the lender.

As for the best option between the two - it completely depends on your financial situation.

For eg. If you require an urgent loan to purchase a bike with minimal documentation, then a personal loan will be a better option.

But if you require a longer repayment term and are comfortable with providing collateral (the bike in question), then a bike loan may be the right choice for you.

Have an idea of your financial situation and your goals and go for the right type of loan based on that.

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