Bikes or Two-wheelers, in today’s times, have become an essential commodity. It adds convenience to our day-to-day life. Be it commuting in your locality, visiting groceries stores, going to shop in nearby malls, or roaming around in the city, bikes are the most preferred mode of transport by Indians.
If you are planning to buy a new bike, the most popular modes of financing, besides cash payment, are either bike loans or personal loans. In this blog, we will sketch out the difference between a bike loan and a personal loan so that you can choose the best option for yourself.
Bike Loan Vs. Personal Loan
Perks of personal loan
1. Unsecured Loan:Personal loans are a type of unsecured loan, i.e., you won’t need to submit any collateral to avail of the personal loan.
2. Minimum documentation required: The documentation and eligibility criteria in the case of a personal loan are not that stringent. You can get personal loans with moderate credit scores as well.
3. Easy to avail:It is one of the simplest modes of getting financing for your emergency needs. There is no much hassle in getting your loan sanctioned in case of a personal loan. You just need to submit the necessary documents, and as soon as everything is approved, the amount will be credited to your designated bank account.
4 .Substantial amount:You can borrow up to 40 lakh depending on your credit history in the form of a personal loan.
5. Longer repayment tenure:The repayment tenure for a personal loan generally starts from 6 months and can go up to 5 years.
Cons of personal loan
1. Higher rate of interest:The rate of interest for personal loans is substantially high compared to any secured loan. In general, it starts from 11.25% and can go up to 60%, depending upon the borrower’s credit history.
2. Unnecessary debt: In general, there is a minimum amount that you can borrow and the duration for which you can borrow the money in the form of a personal loan. So there is a probability that you might have to borrow more than you need, which will ultimately increase your burden.
3. Fees and penalties:Many a time, the creditor might charge you a processing fee for sanctioning the loan. Also, you will be charged huge penalties if you miss the EMI payments.
4 .Substantial amount:You can borrow up to 40 lakh depending on your credit history in the form of a personal loan.
5. Longer repayment tenure:The repayment tenure for a personal loan generally starts from 6 months and can go up to 5 years.
Pros of bike loan
1. Secured loan: The bike loan is a type of secured loan where the vehicle itself is kept under collateral. The bike is like a shared asset between you & the creditor, and you are paying the EMIs to get full ownership of the bike.
2. Lower rate of interest: Since it is a form of secured loan, the rate of interest is quite affordable. In most cases, the interest rates for bike loans are restricted to a maximum of 10%.
3. Tax and depreciation benefits: You can claim tax deductions and depreciation benefits on your two-wheeler loan amount.
4 .Borrow only what you need: Since the amount that will be disbursed to you will be equivalent to the value of the bike, there won’t be much burden on you.
Cons of bike loan
1. Takes time in processing: In general, the processing time for bike loans is anywhere between 4 to 5 days. The documentation is fairly strict in bike loans, and it takes time to process all of those.
2. Limited amount: You can avail of the amount which is equivalent to the value of your bike. You will most probably not be able to use the money sanctioned for bike loans for any other need.
3. Need for documentation: Since bike loans are secured in nature, you will have to submit quite a few documents for hassle-free loan processing.
| Parameter | Bike Loan | Personal Loan |
| Use of the loan amount | It can be used only for purchasing the bike, scooter, or any two-wheeler. | Personal loans can be used for any of your financial or emergency needs. |
| Maximum disbursed amount | One can only get the maximum amount which is equivalent to the value of the bike that is being purchased. | In the case of a personal loan, you can get an amount of up to 40 lakhs. |
| Down payment requirements | One needs to pay around 10 to 20 percent of the on-road valuation of the vehicle. | No need to make any down payments. |
| Rate of interest | It generally starts from 9% onwards. The rate of interest levied on bike loans is moderate in nature. | It starts from 11% onwards. Moreover, the interest rates levied on personal loans are quite high. |
| Repayment tenure | The extended repayment tenure can go up to 7 years. | It ranges between 6 months to 5 years in general. |
| Disbursal and processing time | It takes up to a week to get the amount sanctioned as a substantial amount of paperwork is involved here. | Personal loans have quicker disbursal periods. One can get the amount in a day or two. |
| Bike’s ownership | It is shared between the creditor and you till you pay the last EMI. | The bike is totally under the ownership of the buyer. |
How to get financing for your dream bike?
There are a number of financing options available in the market or on the internet to whom you can approach for getting your bike financed. Besides the traditional modes of financing like banks or NBFCs, there are online or app-based financing solutions available out there. You can leverage any one of those to fulfil your needs.
While traditional financing options like banks and NBFCs will offer a lower rate of interest, you will have to go through a substantial amount of paperwork. However, in the case of online financing, the processing time is relatively quick. Many online creditors also use alternate credit assessing mechanisms, so there is a higher probability of getting financed in spite of having a bad credit history.
Conclusion
Both the modes of financing, i.e., bike loan and personal loan, are quite popular when it comes to financing a two-wheeler. It is totally up to you to pick any option that serves your needs. If you don’t have a reliable credit rating, a personal loan can be a preferable option for you. However, for individuals with good credit scores, bike loans are the best option as they won’t go heavy on your pockets.
If you are looking for a financing option for your bike loan, you can always reach out to Shriram Finance Two-Wheeler loan to get your bike financed without much hassle. It offers customized financing solutions for each individual so that they can own their dream bike as soon as possible. With Shriram Finance, you can get up to 100% financing of the on-road price of your dream bike. It has its presence across cities and motor vehicle showrooms so that you can rest assured of financing and getting your hands on your dream bike without breaking any sweat.
