Choosing between a two-wheeler loan and a personal loan depends on your specific needs and circumstances.
Sometimes it may get confusing whether to take a personal loan or a two-wheeler loan. It is, therefore, important to decide basis some factors which can help you assess what can suit your requirements and cater to your need without putting too much financial stress on you.
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A two-wheeler is not only convenient but also an affordable mode of transportation for Indians. Whether it’s for daily commuting or leisurely rides, a two-wheeler provides flexibility. When it comes to financing, two options commonly considered are two-wheeler loans and personal loans. Let’s explore the differences between these two loan types to help you make an informed decision.
What Is your Purpose?
The primary difference between a two-wheeler loan and a personal loan lies in their purpose. As the name suggests, a two-wheeler loan is specifically designed for purchasing a two-wheeler, such as a motorcycle or scooter. On the other hand, a personal loan is a multipurpose loan that can be used for various purposes, including buying a two-wheeler.
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Interest Rates
Interest rates play a crucial role in determining the cost of borrowing. Two-wheeler loans generally have lower interest rates compared to personal loans. This is because two-wheeler loans are secured loans, meaning the vehicle itself acts as collateral. Personal loans, on the other hand, are unsecured loans, and therefore, lenders charge higher interest rates to mitigate the risk.
Loan Amount and Tenure
The loan amount and tenure can vary between two-wheeler loans and personal loans. Two-wheeler loans typically cover a significant portion of the vehicle’s cost, ranging from 80% to 95% of the on-road price. The repayment tenure for two-wheeler loans is usually shorter, ranging from 1 to 5 years. Personal loans, on the other hand, may offer higher loan amounts, but the tenure is generally shorter than that of two-wheeler loans.
Documentation and Eligibility
Both loan types require certain documentation and eligibility criteria. For two-wheeler loans, you would typically need to provide proof of identity, address, income, and employment details. Additionally, the vehicle’s registration and insurance documents may also be required. Personal loans have similar documentation requirements, but the eligibility criteria may be more relaxed since they are not specifically tied to the purchase of a two-wheeler.
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Processing Time
When it comes to processing time, two-wheeler loans are generally faster than personal loans. Since two-wheeler loans are designed specifically for purchasing a two-wheeler, the loan approval and disbursal process is streamlined, with many lenders offering quick approvals. Personal loans, on the other hand, may have a longer processing time as the loan amount can be utilized for various purposes.
Impact on Credit Score
Both two-wheeler loans and personal loans have an impact on your credit score. When you apply for a loan, lenders assess your creditworthiness by checking your credit history. Timely repayments of either loan type can help improve your credit score. However, defaulting on payments can negatively affect your credit score and make it challenging to secure future loans.
Choosing between a two-wheeler loan and a personal loan depends on your specific needs and circumstances. If you are solely looking to finance a two-wheeler purchase, a two-wheeler loan may be the ideal choice due to lower interest rates and specific loan terms. However, if you require funds for other purposes along with buying a two-wheeler, a personal loan provides more flexibility. Consider factors such as interest rates, loan amount, tenure, documentation, and processing time to make an informed decision.
The table below compares both personal and two-wheeler loans and their interest rates. You can check and take decisions based on your requirements.
Interest on Two Wheeler Loan Vs Personal Loan
Compiled by BankBazaar.com
Note: Interest rate on Personal Loan and Two-Wheeler Loan for all listed (BSE) Public & Pvt Banks considered for data compilation. Banks for which data is not adequately available on their website are not considered. Data collected from respective institution’s website as on 16 May 2023. Banks are listed in ascending order on the basis of Two Wheeler Loan interest rate, i.e. bank offering the lowest interest rate on Two Wheeler Loan is placed at top and highest at the bottom. Interest rate mentioned in the table is indicative and may vary depending on various factors and bank’s T&C.
