Many people who need to move around think about purchasing a car or buying a bike. But should you finance a bike or get a car loan instead?
There’s no one-size-fits-all answer! If you can easily afford to get either a car or bike loan without emptying your personal savings, you can save by paying for the vehicle in cash instead of getting a loan to finance your purchase and being forced to pay interest. If that isn’t the case, a loan could allow you to afford the bike or car you’ve always wanted.
But what are the differences between a car loan and a bike loan? And how could each type of loan impact your vehicle financing options? Let’s find out below.
Car Loan vs Bike Loan
A car loan is very different from a bike loan. Lenders consider both types of loans as different forms of investments.
A car typically costs more than a motorcycle. With increasing fuel prices, more and more people are using bikes instead of cars since they are a more affordable mode of transport. This makes the bike loan process easier than the auto loan application process.
Distinguishing a Car Loan Vs Bike Loan
A car loan is different from a bike loan in more ways than one. The eligibility requirements for getting an auto loan differ from those for a two-wheeler loan.
The repayment terms for a four-wheeler loan are different from those of a motorcycle loan.
Interest rates differ for each loan type and can also vary from one provider to another.
The loan amount approved for a two-wheeler is typically lower than that of a four-wheeler loan.
The factors discussed below should help you figure out whether to choose a bike loan vs. an auto loan.
Repayment Tenure
Repayment tenure is the duration within which you’re expected to repay the loan in full.
Longer repayment tenures expose lenders to a higher risk than shorter ones. Loans with long repayment durations naturally offer higher interest rates to counteract this risk.
A typical repayment tenure for a bike loan is 2 to 4 years, but for vehicles, the tenure can stretch up to 7 or even 10 years.
Since you would have to get a larger amount to buy a car, the repayment tenure is usually longer. That said, a longer four-wheeler loan tenure means you’d pay more money in the long run in terms of interest.
Interest Rate
Bike loans typically attract lower interest rates compared to four-wheeler loans. A long repayment tenure comes with a higher risk for the lender.
Creditors usually charge a high interest rate when approving car loans because the borrower will need up to 7 years to pay off the loan. At the same time, the borrower can pay off a bike loan in 2 to 4 years.
The rate of interest charged varies mostly depending on the lender and their policy. The same creditor may even provide loans at varying interest rates for different motorcycle models.
Premium models, which are typically priced higher than regular bikes, often have lower rates of interest.
Given that the total amount disbursed is large and you would clear it within a couple of years, creditors lower the rate of interest. Nonetheless, they are able to sustain a good profit margin because the interest charged on a higher-priced model is higher than that of ordinary bikes.
Eligibility and the Approval Process
Both car and bike loans have some common eligibility requirements, such as a steady source of income, a satisfactory credit score, and valid proof of identity and physical address (place of residence).
That being said, a motorcycle loan tends to be more accessible. Since the loan amount is usually smaller, lenders apply more relaxed criteria. This makes two-wheeler loans a popular choice among younger individuals, students, and anyone who’s new to credit and just starting their financial journey.
In contrast, approval for car loans takes a more rigorous approval approach, and lenders typically expect borrowers to prove their ability to clear off the loan within the agreed period.
Lifestyle and Maintenance Considerations
For daily commutes to work or maneuvering through city traffic day in and day out, a fuel-efficient bike would be the better option.
For long road trips or comfort on the go, however, a car would be a more reasonable purchase. Cars provide weather protection and more space and are great for families and regular travelers alike.
Similarities Between a Bike Loan and a Car Loan
While there are several differences between a car loan and a bike loan, they also have some similarities worth noting. The documents needed for the loan application process are quite the same, and they include identity verification, salary slip, bank statement, income proof, PAN card, proof of residence, etc.
Unlike personal loans that are free of collateral, both bike and car loans require some form of collateral. So unless and until you clear off your bike loan or car loan, your two-wheeler or four-wheeler can be repossessed by the creditor.
How to Get a Bike Loan vs. a Car Loan?
Now that you know the differences between a bike and a car loan, you need to learn how to get one of these two types of loans.
The process of getting a bike loan is similar to that of applying for a car loan, but it can vary from lender to lender. That said, the basic application process is largely the same.
Below are the key steps to getting a bike loan vs. a car loan:
- Firstly, fill in your basic info and the car or bike details you’re interested in to complete the application form.
- Double-check your personal details (your full name, occupation, age, place of residence, etc.) in the loan application form.
- Confirm your eligibility and repayment tenure, as these vary for each creditor.
- Submit your application. With online banking, expect the approval process to take a couple of minutes.
- The next thing is to obtain the approval letter, which confirms that the loan has been approved.
Now you can present your loan approval document to the dealer to get the bike or car of your dreams.
Conclusion
Car vs. bike loans differ significantly but also share some similarities. If you’re considering getting a bike, start looking for lenders that offer the best rates of interest.
Rates will vary depending on the loan tenure, so make sure to consider and adjust the loan tenure accordingly. The same applies when purchasing a car. In either case, it’s a pleasurable moment, so seize it and enjoy your new ride to the fullest!