Which One Is The Best, A Personal Loan Or A Bike Loan?

Bikes have become an important requirement for any Indian household. A bike is the best option, whether it is grocery shopping, visiting malls, or wandering around town. Besides being fuel-efficient, bikes also help beat the city traffic.

However, it is never a good idea to spend all of your money at once. Instead, getting a loan would be much better if you are planning to purchase a bike. You can buy a bike on loan and repay the loan amount in equated monthly instalments (EMIs). Generally, there are two types of loans for purchasing a bike: a bike loan and a personal loan.

Let’s see what these two loans are:

The bike loan is specifically designed for purchasing a bike. A personal loan can be used for any purpose, including purchasing a bike.

Now, you will also be wondering which one is best: a personal loan or a bike loan.

So, let’s clear up your confusion.

Personal loan

As mentioned earlier, a personal loan can be used for any purpose without mentioning it to the bank. Moreover, getting this type of loan is easier than getting a bike loan.

Pros 

• Lower interest rate:

One of the major benefits of choosing a personal loan over a two-wheeler loan is its lower interest rate. The average interest rate for this loan is around 9% per year. This rate also varies depending on your credit score and the lender you have chosen.

• No down payment:

A personal loan has no down payment or collateral requirement. Buying a bike with a personal loan gets you full financing for the bike’s on-road price. So, if you are running low on cash, getting a personal loan for a bike can help you.

• Minimum eligibility criteria:

To qualify for a personal loan, you only need a certain amount of income and a decent credit score. If you want to get a personal loan quickly, having a good credit score will be the icing on the cake.

Cons 

• High processing fee: Banks and NBFC institutions charge some processing fees. This processing fee is usually a certain percentage of the total loan amount. The processing fee might be high for a personal loan.
• No repayment flexibility: While you can choose the repayment duration, you can’t change it once it is fixed. After choosing a duration, you need to pay the EMI without failing. Failing to do so attracts heavy penalties and, in some cases, legal action too. 

Bike Loan

A bike loan is specially sanctioned for purchasing a bike and is a secured type of loan. It means the bike you purchase with the loan will be the collateral for the loan. Unless the loan is repaid in full, the bike will remain hypothecated.

Pros 

• Secured Loan: While it may seem a drawback to many, the secure nature of bike loans ensures you don’t face legal action for defaulting on the loan. If you miss too many EMIs, the lending partner will take the bike into their possession. You can get it back by paying the EMI plus the penalties imposed. 
• Tax Benefits: You can claim tax benefits if you purchase a two-wheeler on a bike loan. For example, if you are using the bike for professional purposes, you can claim the interest on the loan as a business expense. Moreover, you can also claim deductions on fuel and maintenance of the bike as a business expense. Similarly, you can also claim benefits on the depreciation cost of the bike. 
• Longer repayment Tenure: Earlier, the loan terms for bike loans were the same as personal loans. Nowadays, you can get an extended loan term on your bike loan. So, you can easily pay off the loan without making a dent in your monthly budget.

Cons 

• Higher interest rate: Usually, a bike or two-wheeler loan’s interest rate is higher than a personal loan. The interest rate on a two-wheeler loan depends on various factors, including your income, price, specifications, and vehicle age. If these factors don’t meet the bank’s lending policy, the bank may charge a high interest rate. 
• Down payment: You will need to pay a down payment of around 10–20% of the bike’s on-road price.
• Strict eligibility criteria: Compared to personal loans, banks and NBFCs have strict eligibility criteria for two-wheeler loans. As the loans are secured in nature, you will need to produce quite a few documents. This could be a time-consuming process for you.
• Longer processing time: Bike loans require an average of 4-5 days of processing time. On the other hand, a personal loan is sanctioned on the same day without much hassle. 

Comparison Table

Parameter	Personal Loan	Bike Loan
Purpose	Can be used for any legal purpose	Sanctioned especially for purchasing a bike or two-wheeler
Maximum Sanctioned amount	Based on credit score and activity, up to 40 lakhs	Limited to the price of the bike
Down Payment	No	Anywhere between 10-20% of the on-road cost of the bike
Collateral	No	Yes, the bike
Interest rate (depending upon lender)	10.5%-24%	10.5% onwards
Loan Tenure	6 months to 5 years	Up to 7 years
Loan Sanction time	Same day process	Take 4-5 days
Documentation	Minimal	Various

Conclusion

When it comes to purchasing a bike, both financing models are quite popular. It depends on your preferences and requirements. If you don’t have any other loans, a personal loan will be much easier for you to get. On the other hand, if you are a salaried employee and need a bike for business purposes, going for a bike loan is a much better option for you.

If you are looking for a financing option for your bike, reach out to Piramal Finance. They have various options, from personal loans to bike loans, and their experts will help you choose the right financing option for your dream bike. You can also read their blog and explore the various products and services they deal in.