Personal loan vs. two-wheeler loan: Which is the better choice for you? | Mint

A two-wheeler purchase provides an excellent opportunity to secure convenient transportation both during weekday activities and weekend outings. You could make the purchase through personal loans or two-wheeler loans if you lack all the needed funds. The information about loan differences assists you to choose the right loan when considering your particular needs and financial position.

Personal loan

A personal loan allows you to finance numerous purposes such as debt repayment along with medical emergencies while it covers home improvements and travel and enables the purchase of a two-wheeled vehicle. Borrowers can obtain personal loans at three different levels: unsecured through income evaluation only and credit score assessment and secured through asset or real estate submission as collateral.

Key features of personal loans

• Flexible usage: The personal loan money enables you to use the resources however you want instead of being restricted to bike purchases.
• Loan amount: The available loan amount depends on your income level combined with your credit score under the restrictions set by lenders.
• No collateral: Unsecured personal loans exist so there is no need to present any assets to the lender for guarantee purposes.
• Interest rates: Prudent borrowers usually face higher interest rates from unsecured loans because lenders face increased financial risks. It lies between 10.50% to 24% p.a.

Two wheeler loan

A two-wheeler functions as security for the loan because this type of financing is classified as secured. Two-wheeler loan interest rates fall below those of unsecured personal loan interest rates due to their secured nature.

Key features of two wheeler loans

• Loan amount: Lenders usually provide financial support from 80% to 90% of the bike cost but you need to pay the remaining balance in advance.
• Interest rates: A secured loan status allows lenders to provide interest rates at lower levels than those available for personal loans.
• Collateral: The bicycle functions as loan collateral thereby decreasing the lender’s financial risk.
• Eligibility: To receive financing lenders first determine your credit score together with your monthly earnings and employment security.

Which one should you choose?

1. Analyse financial condition: People who seek affordable interest rates alongside collateral risk should get a two-wheeler loan. The advantage of taking out a personal loan lies in its flexibility since it allows you to obtain extra funding for expenses like bike additions or insurance costs or other expenses exceeding the bike’s original value.

2. Repayment terms: The repayment duration of two-wheeler loans is shorter since it produces increased EMIs while shortening the overall repayment period. Receiving a personal loan grants you extended payment duration together with decreased monthly payments yet leads to increased interests over time.

3. Credit score: A personal loan with low-interest rates requires a strong credit score which you can verify through your score check. Low credit scores create less difficulty when acquiring a secured two-wheeler loan.

In conclusion, therefore, based on the person’s priority list and other considerations, whether or not to get a personal loan or two-wheeler loan to purchase the two-wheeler largely depends. First and foremost, comparison of the interest rates, terms, charges, and restrictions based on eligibility would be essential for making one option from these two.

(Note: Raising a loan comes with its own risks. So, due caution is advised)