Buying a two-wheeler is often a top consideration for individuals looking to save on petrol costs. The loan choice can be perplexing if you need financial help to purchase a bike or scooter. When financing a two-wheeler, there are two main options: a personal loan and a two-wheeler loan. Understanding the differences between these loan types is vital before deciding on a borrower.
Personal Loans
Personal loans are unsecured loans that can be used for various purposes, such as settling medical expenses, financing a family member's wedding, or buying a bike or scooter. They usually come with higher interest rates than secured loans like two-wheeler loans. However, personal loans offer better repayment terms. Sometimes they offer competitive interest rates based on the applicant's credit history and the ability to repay.
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Two Wheeler Loans
Two-wheeler loans are secured loans designed explicitly for purchasing two-wheelers. They offer lower interest rates and have different eligibility criteria and repayment tenures than personal loans. Also, the loan amount for a two-wheeler might be lower than for other purposes.
Now, considering a few factors, let's compare personal and two-wheeler loans to determine which one is more suitable for buying a two-wheeler. For this purpose, let's explore the offerings of two major lenders, SBI and HDFC Bank.
Interest Rate: Personal loans usually have higher interest rates than two-wheeler loans. A good credit score can help you get a lower interest rate on a personal loan. However, a two-wheeler loan would be a better option if you prioritise the lowest interest rate. For instance, the State Bank of India (SBI) provides pre-approved two-wheeler loans with an annual 11.90 per cent interest rate. For other customers, the rate ranges from 17.80 per cent to 19.55 per cent per annum. For SBI personal loans, the interest rate ranges from 11.05 per cent to 13.55 per cent for central government employees and 12.05 per cent to 14.05 per cent for corporate employees. But the rates can increase to 27 per cent depending on the customer's credit and risk profile.
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The HDFC Bank's interest rates on a two-wheeler loan range from 9.99 per cent to 24.95 per cent, or an average of 19.01 per cent. For personal loans, the bank offers an interest rate of 10.50 per cent to 24 per cent for salaried individuals.
Loan Amount: Two-wheeler loans generally offer a lower loan amount than personal loans. For instance, SBI provides pre-approved two-wheeler loans with a loan amount ranging from Rs. 0.20 lakh to Rs. 3 lakh.
The maximum personal loan amount is Rs. 30 lakh. So, a personal loan might be better if you need a high-value loan to finance your two-wheeler. Further, two-wheeler loans usually don't offer the total value of the new bike. From SBI, you can avail a loan of up to 85 per cent of the vehicle's On-Road price, subject to eligibility. Also, if you plan to buy a superbike, you may need a higher amount, for which you may need a personal loan. Several banks, including SBI, offer a separate two-wheeler loan scheme for superbikes.
Repayment Term: Personal loans provide a longer repayment period than two-wheeler loans. You can choose a repayment period of 12 to 72 months with a personal loan, while two-wheeler loans usually offer a repayment tenure of up to 36 months. The repayment tenure for SBI's two-wheeler loans is up to 48 months but varies across banks and can be shorter for other banks.
Eligibility: The eligibility criteria for a personal loan are generally stricter than those for a two-wheeler loan. Obtaining a personal loan is relatively easy if you have a steady income, a good credit score, and a positive credit report. However, a two-wheeler loan could be a suitable option for individuals without these qualifications.
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Final Word
Your choice of loan should be based on your specific needs and income. A two-wheeler loan is the best option if you prioritize a low-interest rate and a secure loan.
However, suppose you are a central government employee or a high-salary individual or hold a salary account with the same bank. In that case, the bank might provide personal loan rates comparable to or even better than two-wheeler loan rates. Also, a personal loan may be more suitable if you require a higher loan amount and a longer repayment period.
