Two Wheeler Loan Vs Personal Loan: How to Make the Right Choice?

Prospective bike buyers usually rely on Two Wheeler Loans to fund their purchases. For instance, if you plan to purchase a bike with a Two Wheeler Loan, you can finance up to 95% of its cost with a loan and bring your dream bike home with just 5% down payment. In return, you repay the loan in instalments to your loan provider, and the bike remains the lender’s asset until you repay the loan completely. However, a bike loan is one of many funding options for a bike purchase. You can also opt for a Personal Loan to pay its value. 

Are you confused between a Personal Loan and a Two Wheeler Loan to purchase the bike you want? Below you will understand the differences between the two loan options and learn how to make the right choice. 

What is a Two Wheeler Loan? 

A Two Wheeler Loan is a secured loan to buy a new bike. However, a lien backs it up, giving the loan provider a legal right to repossess the bike if you fall behind on your loan repayment. Once you fully repay the loan, the lender releases the lien, and you get complete ownership of the bike. A bike loan can cover up to 95% of the bike’s on-road price. You must bear the remaining 5% from your savings as a down payment. 

What is a Personal Loan?

Personal Loans are unsecured funding options that do not require any collateral or lien. You can borrow a Personal Loan without end-use restrictions and use it for any purpose, including a bike purchase. You can fund 100% of the bike’s cost with it and repay it to the lender in easy EMIs. However, since these are unsecured loans, they bear a higher risk for the loan company, causing the Two Wheeler Loan interest rate to be lower than Personal Loans. 

Points of Difference Between Personal Loans and Bike Loans 

Here are a few points of difference between the two loan types:

  • Versatility: 

Personal Loans have no end-use restrictions, making them an ideal funding choice for any purpose, including a wedding, medical treatment, home renovation, education, vacation, or bike purchase. However, a Two Wheeler Loan has restricted end-use limited to a bike or scooter purchase only. You cannot use a bike loan for any other purpose.

  • Loan Amount: 

A Personal Loan amount can be anywhere up to Rs 5 Lakh depending on your income, credibility, debt-to-income (DTI) ratio, etc. The maximum loan accessibility varies between finance companies. On the other hand, the bike loan amount is restricted to the bike’s on-road price. Many reputable NBFCs cover up to 95% of the bike’s cost.

  • Collateral or Down Payment: 

Personal Loans are unsecured loans that do not require any collateral, security, guarantor, or down payment for sanction. A bike loan is a secured loan that retains your bike’s lien until you repay the total loan amount. Since an NBFC may cover up to 95% of the bike’s price, you must pay the remaining 5% as a down payment.

  • Interest Rate: 

Bike loans are secured, so they have a lower lending risk for the loan company. If you fail to repay the loan, the lender will repossess your bike and sell it to recoup their outstanding balance. So, they charge a lower two wheeler interest rate than Personal Loans that involve a higher risk for the lender.

  • Repayment Tenure: 

Both Personal Loans and bike loans have flexible repayment tenures you can choose according to your affordability. However, Personal Loans have a repayment period of up to 60 months, while bike loan tenures may be up to 48 months. EMI calculators can help you select a suitable loan term with budget-friendly EMIs.

  • Documentation Requirements: 

Since Personal Loans are unsecured, they do not involve any collateral-related documents and formalities. On the other hand, bike loans require more documents pertaining to the bike to be purchased, including its papers, registration, lien, etc.

Deciding Between a Bike Loan and a Personal Loan 

Now that you understand the difference between the two loan types, here are a few points to consider while deciding between them:


The primary point you must consider while deciding between a bike loan and a Personal Loan is their purpose. While a bike loan is specifically meant for a two wheeler purchase, you can choose a Personal Loan to cover various costs related to the transaction, including down payment, bike modification, accessories, registration charges, etc. 

Down Payment: 

Although many NBFCs fund up to 95% of the purchase cost with a bike loan, you can obtain that loan-to-value (LTV) ratio only if you are an extraordinary borrower fulfilling the lender’s conditions. Even if you receive 95% of the bike’s cost with a two wheeler loan, you must arrange the remaining 5% as a down payment. It might become challenging, especially if it is an expensive bike. In that case, you may opt for a Personal Loan covering 100% of the bike’s cost and other related expenses.

Interest Rate: 

The interest rate is crucial in determining the borrowing cost. Although Personal Loans cover 100% of the bike’s price without any down payment or collateral requirement, their interest rates are higher than bike loans. A lower Two Wheeler Loan interest rate is one benefit of purchasing a bike with a bike loan.

Impact on the Credit Score: 

Both personal and two wheeler loans can affect your credit score. Lenders check your credit score to evaluate your creditworthiness in both cases. However, when you purchase a bike with a bike loan, you can repay it easily by surrendering your bike’s lien. In the case of a Personal Loan, you will be liable until you repay the loan in full. 

The final decision between a Two Wheeler Loan and a Personal Loan completely depends on your financial well-being. For instance, if you need an urgent loan with minimal documentation requirements and no collateral involvement, a Personal Loan would be a better option. However, if you are sure of repayment and are okay with keeping your bike’s lien with the lender until repayment, a bike loan would be the right choice.