By George Thompson If you’re planning to buy a bike, it is essential for you to know the difference between a personal loan and a two wheeler loan. Knowing the ways in which both loans differ from each other will help you make a more informed decision. If you’re wondering which one among these two would be more helpful in your journey to make your dream of owning a two wheeler come true, continue reading to find out.
What is a personal loan?
A personal loan is essentially a loan credit facility offered by a financial institution. One of the main highlights of this loan is that you’re not required to put up any collaterals for availing the credit facility. This essentially makes a personal loan an unsecured loan. And, a personal loan has no restrictions with respect to the usage of the disbursed loan amount. This effectively means that you can use a personal loan for funding almost any expenses such as for traveling, medical expenditures, and even for purchasing a two wheeler.
What is a two wheeler loan?
A two wheeler loan is a loan credit facility offered by a financial institution for the purchase of a two wheeler such as a motorcycle or a scooter. Unlike a personal loan, a two wheeler loan can be used only for the purchase of a two wheeler and not for satisfying any other expenses. Also, since a two wheeler loan is secured, you’re required to put up collateral, which is almost always the two wheeler that you purchase.
Which loan facility would be more helpful when it comes to purchasing a two wheeler?
To answer this question, let’s first compare both of these loans side-by-side.
| Particulars | Two wheeler loan | Personal loan |
| Usage of the loan amount | Restricted to the purchase of two wheelers alone. | Completely unrestricted. Can be used to purchase anything including two wheelers. |
| Maximum amount of loan that can be availed | The price of the two wheeler. | Depends on the individual. Can be anywhere between Rs. 5,000 to Rs. 20 lakhs and above. |
| Loan down payment | Required to pay a down payment of around 10 to 20% of the two wheeler’s cost. | No need to pay any down payment. |
| Interest rates | Since the loan is secured against the two wheeler, the interest rates generally tend to be lower than that of personal loans. | Since the loan is unsecured, the interest rates on personal loans are much higher. |
| Maximum tenure of the loan | Can be extended till 7 to 10 years. | Restricted to a maximum of 5 years. |
| Eligibility criteria | Since the loan has the two wheeler as a collateral, the eligibility criteria is generally more relaxed. | Is dependent on the lender. |
| Documentation | Requires you to submit some documents. | Requires minimal documentation. |
| Ownership of the two wheeler | The two wheeler is hypothecated to the financial institution till the repayment of the loan is complete. | Remains with the owner. |
| Lenders | Banks and financial institutions like NBFCs offer two wheeler loans. | Banks, financial institutions like NBFCs, and even online lenders offer personal loans. |
Conclusion
Although the above table does quite a good job of giving you an objective comparison between the two types of loans, the choice is ultimately dependent on you and your needs and requirements.
If you’re a person who prefers to not make any down payments, then a personal loan may just be the right choice for you. In addition to that, you also don’t have to put your two wheeler up as a collateral for the loan.
On the other hand, a two wheeler loan also has its own advantages. Firstly, the interest rates are far lower and secondly the tenure can be extended till 7 to 10 years, giving you ample time to settle the loan.
Therefore, as you’ve already seen above, choosing between either of these two options completely depends on the individual and their preferences. That said, if you’re ever in the market for a two wheeler loan, always make sure that you take a look at the bike loan eligibility criteria and use a two wheeler calculator before applying for one.
Lorenzo Billie 
james