Are Bike Loans Secured or Unsecured?

Two-wheeler loans have been a common thing for years now. They allow us to purchase a bike with little initial investment, and the EMIs are affordable, which helps us reduce dependency on public transport and improve our quality of life. In light of the recent global pandemic, the ability to move around freely without dependence on public transport has become more important than ever. Let us learn a little more about bike loans, specifically, are they secured or unsecured loans?

The Difference Between a Secured and Unsecured Loan
A ‘secured loan’ is a loan taken against ‘collateral.’ This collateral is something of value that the customer will need to forfeit if they default on the loan repayment. Secured loans can have different types of collateral. Home loans are secured loans, as are gold loans since they hold property or gold as collateral. Another type of secured loan is a car or two-wheeler loan – the vehicle in question is the collateral. If you default on a secured loan, the collateral is taken by the lender to minimise the loss.

An ‘unsecured loan’ is a loan provided to an applicant without any collateral. This is a relatively high-risk loan since there isn’t anything that the lender can repossess in case the loan is defaulted upon. As such, lenders will think twice before lending large sums of money or lending for an extended period of time. With unsecured loans, you can expect the amounts approved to be lower, the interest rates higher, and the tenures shorter to mitigate the extra risk over an unsecured loan.

Whether you should opt for a bike loan or an unsecured loan like a personal loan depends on a number of factors. If your chosen two-wheeler is an expensive one, it might be better to opt for a bike loan, as bike loan interest rates will certainly be lower than a personal loan. If the loan amount you need is small, you might want to opt for the unsecured loan, as that means that the bike title is clear, and you won’t have to go through the process of removing the hypothecation from the registration, which involves time, effort, and money.

The disbursal of a personal loan is much quicker than a bike loan, although bike loans are approved for higher amounts and are approved much more easily due to the presence of collateral. If you’re unsure as to which one will suit you better, you can use tools like a bike loan EMI calculator that are present on lender websites that will help you calculate what amount and tenure will be suitable for you, by giving you the exact EMI amount that you will need to pay once the bike loan is sanctioned.

Remember to factor in costs like insurance and the cost of any accessories like paint treatment or luggage before you go ahead and apply for a bike loan because these can rapidly add a significant amount to the bike’s initial purchase price. Once you’re sure you’ve finalised the bike accessories list (including a quality helmet!), you can then decide on the amount you require for the loan, and this will allow you to make an educated choice between a bike loan and an unsecured loan.