Which One Is The Best, A Personal Loan Or A Bike Loan?

Want to know the comparison between personal loan & bike loan, so that you choose the best one among them? Dive into this article to know the key differences!

2 Dec,2022 10:03 IST 43 Views
Which One Is The Best, A Personal Loan Or A Bike Loan?

Do you want to buy your dream bike on credit but not sure which loan to seek – a personal loan or a bike loan? Well, we have an easy answer to this and more related queries to help you decide better.

While there are specially designed auto loans to fund a new bike purchase, personal loans can be used for various needs, including a bike or two-wheeler purchase.

But first, let’s get a quick idea of both the loans.

What Is A Bike Loan?

A bike loan is a secured loan taken to buy a new two-wheeler and is backed by a lien – a legal claim that allows the lender to repossess the bike if the borrower falls behind on payments. Once the loan is fully paid off, the lien is released. A bike loan typically covers up to 80-90% of the on-road price of the bike. The remaining 10-20% has to be borne by the borrower.

Unlike personal loans that can be used for any purpose, a bike loan must be used only to buy a bike. But unlike personal loans, it has a lower interest rate.

What Is A Personal Loan?

A personal loan is an unsecured loan. Simply put, a personal loan doesn’t require any collateral. But it carries a higher rate of interest than secured loans such as a bike loan or a home loan. While the interest rate on personal loans varies for individuals, it is largely based on the CIBIL score and the credit report.

A personal loan can be used for any legitimate purpose in a variety of circumstances, including medical expenses, to pay off debt, wedding expenses, a vacation, and buying consumer goods.

The Differences

So, what is the difference between both the loans and which one should a person avail?


The biggest difference between a personal loan and a bike loan is the collateral. A personal loan doesn’t require the borrower to provide any collateral to the lender. But in case of a bike loan, the two-wheeler itself acts as the collateral.

Interest Rate:

As mentioned earlier, the interest rate on a personal loan is generally higher than that of a bike loan. The main reason for that is the higher risk involved in the absence of a collateral. The current rate of interest on a bike loan is 9.55% to 18.95% per annum. On the other hand, the rate of interest on personal loans starts from 11.00% and can go up to 34.00%.


A bike loan is usually taken for at least three years (going up to eight years) while a personal loan can be availed for a few months to as much as five years.

Approval Process:

Getting a personal loan approved is usually a simple affair, as is taking out a bike loan. However, for a personal loan, the borrower’s credit score comes into the picture. A borrower with a poor credit score may face rejection of the loan application. The same borrower may get a bike loan because of the presence of a collateral.


In case a borrower doesn’t have the funds to pay the 10-20% of the on-road price of the bike, opting for a personal loan could be a good option since the borrower will be able to get the entire amount at once.


Another important difference between a bike loan and a personal loan is the ownership of the vehicle. A personal loan will provide immediate ownership as soon as the borrower purchases the bike. However, in the case of a bike loan, the ownership of the vehicle will be transferred to the borrower only after the repayment of the entire loan amount since bike loans are secured loans.


While there is no one answer to the question which loan to be availed for buying a new bike, borrowers need to carefully weigh the pros and cons of both the loans.

The total amount of interest paid on a personal loan or a bike loan is mainly based on the individual’s credit rating and credit score. Generally speaking, a bike loan will carry a lower interest rate than a personal loan.

However, if you have a good credit score, you can easily get a personal loan from reputed lenders such as IIFL Finance at competitive interest rates. IIFL Finance provides personal loans through a quick, fully online process and without much paperwork. In addition, it doesn’t have any hidden charges and offers easy repayment options.

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