Making sound financial decisions is essential to a hassle-free two-wheeler purchase experience. Personal loans and two-wheeler loans are two common ways to finance this purchase. Both can help you realize your dream of having a two-wheeler, but choosing wisely requires knowing the distinctions. In this tutorial, we’ll review the fundamentals of Two Wheeler Loan vs Personal Loan, their advantages and disadvantages, and how to pick the ideal one for your requirements.
What is Two Wheeler Loan vs Personal Loan?
- Two-Wheeler Loan: Purchasing a bike can be financed with a two-wheeler loan. Banks typically provide financing up to 80% to 95% of the car’s on-road cost. The remaining sum must be paid in advance as a down payment. Since it’s a secured loan, your bike serves as collateral and security until the loan is paid back. In comparison to personal loans, the interest rate is lower. The loan amount can only be used to purchase a two-wheeler.
- Personal Loan: An unsecured loan that can be utilized for any kind of financial need is a personal loan. Personal loans have no end-use restrictions, so you can use the money for anything, from purchasing a device to covering medical expenses. There is a greater chance of default because it is an unsecured loan. Banks raise the interest rate on personal loans as a result.
Features of a Personal Loan
- This loan has no collateral and is unsecured.
- The money can be used however you see fit.
- The loan must be repaid within 12 to 84 months.
- A minimum loan amount of approximately ₹50,000 is required.
- Although this may differ from lender to loan, interest rates might begin at 10.28%.
- A higher credit score enables you to acquire a greater loan amount and lower interest rates.
Features of a Bike Loan
- The money can only be used to buy a bike.
- The bike is used as collateral for this secured loan.
- The loan must be repaid between 12 to 48 months.
- A minimum loan amount of around ₹25,001 is required.
- The loan balance is the same as the bike’s purchase price.
- A higher credit score can help you get a lower interest rate.
- Interest rates for bike loans might start at 10%, depending on the lender you choose.
Choose the Right One
- Two-Wheeler Loans explained: Your bank has secured this loan, which is being used to buy a two-wheeler, like a motorbike or scooter. If you are unable to make loan payments, the bike itself acts as collateral. “No” is the answer to the question of whether a two-wheeler loan can be used for personal purposes.
- Personal Loan explained: Your bank has granted you this unsecured loan to cover any costs, including emergency hospital stays, travel, or the purchase of a product like a mobile phone, appliance, or two-wheeler.
Key Considerations for Bike Loan Comparison
- Interest Rates: Interest rates for two-wheeler loans are typically lower than those on personal loans. This is because the bike lowers the lender’s risk by acting as collateral.
- Loan Amount: Personal loans frequently enable you to borrow bigger sums, whereas two-wheeler loans are restricted to the cost of the vehicle.
- Flexibility: More usage flexibility is provided by personal loans. Higher interest rates are the price paid for freedom, though. The total cost of personal loans is significantly higher than that of two-wheeler loans when processing fees—an upfront fee assessed at the time of loan disbursement—are taken into account.
- Credit Score Impact: Your credit score will be impacted for both loans if you miss several EMIs. Maintaining a strong credit score—typically above 750—is crucial if you want fast access to credit. Therefore, always be sure to pay your loan EMIs on schedule.
Conclusion
When financing your dream bike, choosing between a Two Wheeler Loan vs Personal Loan is essential. Each solution offers distinct benefits and meets distinct demands. Personal loans provide flexibility for a range of needs, whereas two-wheeler loans are secured with reduced interest rates. To assist you in selecting the best financing option for your needs, this article examines their features, benefits, and drawbacks.