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Difference Between Personal Loan And Bike Loan

Are you looking to purchase your ideal bike with financing but are unsure whether to apply for a personal or bike loan? To assist you in making a better decision, we offer a simple response to these and other relevant questions.

Although there are auto loans specifically designed to finance the purchase of a new bike, personal loans can be used for a variety of purposes, including the purchase of a bike or two-wheeler. But first, let’s quickly review both loans.

A Bike Loan: What Is It?

A secured loan is used to purchase a new two-wheeler, and a bike loan is protected by a lien, which is a court order that gives the lender the right to seize the bike if the borrower defaults. The lien is released upon complete repayment of the loan. Usually, a bike loan will pay for 80–90% of the bike’s on-road costs. The remaining 10–20% is the borrower’s responsibility.

A bike loan can only be used to purchase a bike, as opposed to personal loans, which can be used for any reason. Nonetheless, its interest rate is lower than that of personal loans.

A Bike Loan’s Features

  • Loan Amount – Depending on the borrower’s income, credit score, and other circumstances, bike loans can be obtained for sums between Rs 10,000 and Rs 1,50,000.
  • Loan To Value (LTV) Ratio – For this loan, the LTV Ratio may reach 95% of the total loan amount.
  • Low & Attractive Interest Rates – Typically, bike loans have set interest rates that are both low and appealing for the length of the loan period.
  • Flexible Tenure – Depending on the borrower’s ability to repay the loan and the lender’s rules, the repayment period for a bike loan can be as long as 48 months.
  • Available For – Bike Loans are available, subject to eligibility requirements and other policies, to salaried, self-employed, and other professionals.

Read more: Tips To Get Instant Approval For a Bike Loan

A Personal Loan: What Is It?

An unsecured loan is what a personal loan is. It is simply true that no collateral is needed for a personal loan. However, the interest rate is higher than on secured loans like home or bike loans. Although each person’s personal loan interest rate is unique, it is mainly determined by their credit report and CIBIL score. Any legal reason under the sun can use a personal loan, such as paying for consumer items, paying off debt, paying for a wedding, going on a vacation, or covering medical costs.

A Personal Loan’s Features

  • Loan Amount – Personal loans up to Rs 5,00,000 are available; the precise amount will depend on several factors, including your income and credit history.
  • Declining Interest Rates – Interest rates for personal loans are typically lower than those on credit cards and other unsecured credit.
  • Quick And Simple Process – It is possible to apply online or offline, and once approved, the cash is disbursed quickly. The process is quick and straightforward.
  • Unsecured Credit – Since personal loans are unsecured loans, you can obtain one without putting up any collateral.
  • Adjustable Tenure – The payback period for a personal loan is flexible and can last up to five years, depending on your ability to repay the loan and the lender’s regulations.
  • Various Final Uses – It can be applied to several things, including debt relief, home improvements, wedding costs, educational costs, and medical bills.

Personal Loan Vs Bike Loan: Differences

  • Collateral – Collateral is the primary distinction between a personal loan and a bike loan. The borrower is not required to give the lender any security to receive a personal loan. However, in the event of a bike loan, the bicycle serves as collateral.
  • Interest Rate – As was previously said, a personal loan often has a higher interest rate than a bike loan. The primary cause of this is the increased risk that comes with not having collateral. A bike loan’s current interest rate ranges from 9.55% to 18.95% annually. Conversely, personal loans have an interest rate that ranges from 11.00% to 34.00%.
  • Tenure – While personal loans can be taken out for a few months to as long as five years, bike loans are often taken out for a minimum of three years and a maximum of eight years.
  • Procedure For Approval – Approval of a personal loan and acquisition of a bike loan are often straightforward processes. On the other hand, the borrower’s credit score matters when it comes to a personal loan. An applicant for a loan who has a low credit score could have their application denied. Because there is collateral, the same applicant may be eligible for a bike loan.
  • Amount – Since a personal loan allows the borrower to receive the total amount at once, it may be a wise choice if they lack the money to pay 10-20% of the bike’s on-road price.
  • Possession – Ownership of the vehicle is a crucial distinction between a personal loan and a bike loan. As soon as the borrower buys the bike, ownership will be granted immediately through a personal loan. On the other hand, because bike loans are secured loans, ownership of the vehicle won’t pass to the borrower until the total loan amount has been paid back.

Read More: What Documents are Required for a Two-Wheeler Loan


While there isn’t a single best loan to take out when purchasing a new bike, borrowers should carefully consider the advantages and disadvantages of each loan. A person’s credit score and rating mainly determine the total interest paid on a personal loan or a bike loan. In general, the interest rate on a bike loan will be lower than that of a personal loan.

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