If you’re tired of increasing traffic, surging cab prices, or fed-up from waiting for the bus, don’t get worked up! It’s a sign telling you to think about getting your own motorcycle. A spanking new bike that’ll let you swerve around the traffic and save a lot of time.
So if you’re thinking of purchasing a bike – either for convenience or for leisure – getting a bike loan is a good idea, especially if you’re running short on cash. Bike finance helps you split up your bike’s amount into small, manageable monthly installments, allowing you to own your dream machine without denting your savings.
However, before you start checking your two-wheeler loan eligibility, it’s essential that you know the types of loans available in the market, and which one fits your preferences the best.
Essentially, two-wheeler loans come in two types – secured and unsecured loans.
What is a secured loan?
Simply put, a secured loan is protected by an asset. It can be anything, from your home to your car, or in this case, your bike. Usually, the item, which is purchased using a loan, is used as collateral or guarantee. Other items such as personal property, stocks, or fixed deposits can also be used as security.
Most motorcycle loans are secured with your bike as the collateral. However, if you wish that your motorcycle is purchased under your name, and not the lender’s, you can put up other assets as collateral as well.
Features of a secured loan
A secured two-wheeler loan means a lower interest rate. Since your lender has collateral against your loan, your loan is low-risk and the two-wheeler loan interest rate would reflect that. Such low-risk two-wheeler loans can also be relatively easier to obtain. The downside is that missed EMI payments could lead to the collateral being seized by the lender as compensation.
What is an unsecured loan?
Unsecured loans are the opposite of secured loans. This financing option includes credit cards, student loans, and personal loans. Forwarding an unsecured loan is a tad risky for the lender as there’s a lack of security. Hence, unsecured loans for motorcycles are provided at a relatively higher bike loan interest rate.
Features of an unsecured loan
With an unsecured loan, there is no need for collateral and hence the interest rate will reflect this higher risk. But if your credit history is solid, you can avail of an unsecured loan easily.
Additional Read: Things to Know While Comparing Two-Wheeler Loans
Which one should I opt for?
There are several factors to consider while choosing your loan type:
1. Interest rate
If you wish to have a lower two-wheeler loan interest rate and have an asset that you can pledge as collateral, a secured loan might be the right fit for you. A lower interest rate means lower EMIs and lesser financial strain. Also, since you’re providing an asset as a security, the chances of loan approval are high and might get you a higher loan amount as well.
With an unsecured loan, your EMI amount will be considerably higher, so your repayment capacity should be factored in while deciding on the type of loan.
2. Credit score
The best part of a secured loan is that you can get a loan without having to worry about your credit history. Having said that, your credit history isn’t completely ignored. If you have a fairly low credit score, you might still get a loan, but at considerably higher interest rates. But if your credit scores are high, you can try to get a lower two-wheeler loan interest rate than average.
In the case of unsecured loans that are forwarded solely based on your credit history, it’s essential to maintain a decent credit score (anywhere between 700 and 900). If not, your loan request may be denied outright because of the higher risk factor. So if your credit score is on the lower side, a secured loan would work more in your favour.
3. Attitude towards collateral
Unsecured loans are relatively less straining than secured loans, as you don’t have to worry about your assets constantly. So if you’re not comfortable with putting up your assets, and aren’t bothered by a slightly higher 2-wheeler loan interest rate, an unsecured loan is the way to go.
4. Other benefits
Usually, when you avail of specific loans like a two-wheeler loan, which is generally secured, the lender may offer some extra benefits. For example, zero-down payment loans where they cover 100% of your vehicle’s value or flexible EMI payment options that you can leverage to suit your needs. Some lenders may also offer corporate discounts on processing fees of such specific loans.
A bike loan can have a significant impact on your finances for the duration of its tenure. So analyse the financial implications of the different loan options available to you and choose the one that best fits your requirements.
Additional Read: CIBIL Score for Vehicle Loans
In the end
Looking for a way to finance your dream bike? Well, Tata Capital is here to help you! Apply for our affordable two-wheeler loans today, and get fast disbursals, competitive interest rates, and a customizable tenure. What’s more, you can also use our bike loan EMI calculator to plan your repayment schedule.
So what’re you waiting for? Visit our website to check out our bike finance offerings today!
14 March 2024
5 mins read
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