Should You Buy a Bike With Personal Loan or Two Wheeler Loan – Know Here
Prospective two-wheeler owners in India rely on two-wheeler loans to purchase their favourite bikes and scooters. However, earlier this year, to control the liquidity and keep inflation in check, the Reserve Bank of India decided to hike the repo rate by 40 basis points to 4.40%. RBI also hiked the Cash Reserve Ratio (CRR) by […]
Published Date - 16 November 2022, 01:25 PM
Prospective two-wheeler owners in India rely on two-wheeler loans to purchase their favourite bikes and scooters. However, earlier this year, to control the liquidity and keep inflation in check, the Reserve Bank of India decided to hike the repo rate by 40 basis points to 4.40%. RBI also hiked the Cash Reserve Ratio (CRR) by 50 basis points to 4.50%. This does not come as good news for individuals wanting to approach banks to avail of two-wheeler loans. These measures, in essence, translate to higher interest rates and higher floating rate EMIs. Moreover, the overall loan approval ratio may come down as banks aren’t as willing to offer two-wheeler loans to applicants with low credit scores.
Today, individuals can approach banks, NBFCs or captive financiers to get bike loans. However, a two-wheeler loan isn’t necessarily the only financing option available at an individual’s disposal. You can also apply for – and get a personal loan and use the loan amount to purchase your desired two-wheeler. This isn’t a novel idea, as some prospective bike owners apply for personal loans to finance a new two-wheeler. That said, personal loans and bike loans are inherently different and come with different frameworks.
Differences between personal loans and bike loans
While applying for a personal loan, you do not have to put your assets as collateral. That is, these are unsecured loans and are typically used to meet emergencies or immediate expenses. You can avail of a personal loan to meet travel, medical, marriage or any other expense, and these are usually short-term loans. Furthermore, the documentation required to get access to a personal loan is less stringent, and you can approach banks, NBFCs and fintech lenders to get a personal loan.
On the other hand, two-wheeler loans are secured loans, as you can avail of the loan against the security of your bike. Thus, the two-wheeler remains hypothecated with the lender or the Regional Transport Office until you repay the loan in full. Moreover, certain lending entities have lengthy documentation procedures, and banks usually look for borrowers with good credit scores.
Personal loans – Advantages and disadvantages
Before purchasing a two-wheeler, it is prudent that you research personal loans and know about the pros and cons. You can also use a bike loan EMI calculator to see if you should apply for a personal loan or a two-wheeler loan. That said, here are some advantages and disadvantages of obtaining personal loans to purchase a two-wheeler.
Advantages
- No collateral – Unlike two-wheeler loans, personal loans are unsecured loans. You do not have to provide any assets as collateral.
- Zero down payment – Usually, when you apply for a two-wheeler loan, you have to make a certain down payment. This can be RTO and insurance premium charges, or 15-30% of the two-wheeler’s on-road price. However, you won’t have to dig into your savings to make a down payment when you take a personal loan. Instead, you can pay for the two-wheeler using a part of the loan amount.
- Minimum eligibility criteria – The eligibility criteria for personal loans aren’t as stringent as those for two-wheeler loans. Two-wheeler loans usually have a higher salary slab. However, you can meet the basic eligibility criteria and avail of a personal loan.
- 100% funding: You can finance 100% of the two-wheeler’s cost using a personal loan.
- Significant amount: You can get up to ₹40 lakhs when applying for a personal loan, and you can purchase premium, high-end bikes easily.
Disadvantages
- Interest rates – As personal loans are unsecured loans, these tend to come with high interest rates. The interest rate also depends on your credit score. NBFCs and certain banks offer two-wheeler loans at substantially lower interest rates compared to personal loans.
- Repayment tenure – Personal loans are short-term loans and are used to meet urgent requirements. Thus, they also have smaller repayment periods. However, certain lending entities offer up to 7 years to repay your bike loan.
- Fees and penalties – Personal loans tend to come with processing fees that can be significant, depending on the loan amount. Additionally, the lender might charge substantial penalties if you miss any EMI payments.
Should you opt for a two-wheeler loan?
Both personal and two-wheeler loans come with their set of pros and cons. Bike loans, unlike personal loans, are secured loans. Hence, lending entities offer highly competitive interest rates. Furthermore, you can also claim tax deductions and depreciation benefits on your bike loan amount. Additionally, you won’t risk accruing substantial debt, as you can apply for – and get the exact amount you need to purchase the bike. This can be done using a bike loan EMI calculator, and you can select payment terms that are convenient for you.
Personal loan vs. Two-wheeler loan
Both financing options allow you to purchase your dream two-wheeler without disrupting your savings. If you want to buy a bike immediately and do not want to go through the hassles of lengthy documentation, you can apply for a personal loan and purchase your dream bike. Similarly, you can apply for a personal loan if you do not have a good credit score (less than 750). Alternatively, if you want to avail of low interest rates and long repayment tenures, you can apply for a two wheeler loan. You can make a decision based on your credit profile, necessity and preference.
You can now apply for a two-wheeler loan online and avail of up to 100% financing of the two-wheeler’s on-road price by visiting Bajaj Markets. Additionally, you can also benefit from low interest rates and faster processing times. This way, you can get your hands on your dream bike without worrying about interest rates or long waiting periods.