Two Wheeler Loan Advantages and Disadvantages

Some people opt for a personal loan, and then buy a two-wheeler like a bike or a scooter of their choice, with the loan amount. But this way, you would have to pay higher interest rates, and the overall amount of your two-wheeler would be much higher in the end. And why opt for a personal loan when you have a better option like two-wheeler loans? Almost all the functional banks in India provide two-wheeler loans, and the overall process of opting for such loans is much easier, and fast. Since people don’t have enough information about two-wheeler loans, that’s why they choose other loan options to buy a bike or scooter of their choice.


But if you are considering a two-wheeler loan option, then congrats because you are off to a good start. Today we will be taking a look at every possible benefits as well as drawbacks of opting for a two-wheeler loan. So stay tuned for that because some interesting information is waiting for you.

? Two Wheeler Loan Advantages

Here are some pros of taking two wheeler loan:

1. Much Lower Interest Rates

Compared to personal loans, two-wheeler loans have much lower interest rates. As mentioned earlier, some people buy two-wheelers using their personal loan amount. And people do that because they don’t actually know about the two-wheeler loans. Another thing is that when buying a bike or scooter, people opt for the EMIs from the dealer. And in most cases, the dealers refer you to a private finance company, which charges way higher interest rates with hidden charges. On average, when you opt for personal loans, you have to pay a minimum of 12.75% interest rate, which can go as high as 19%, and even higher than that. Talking about two-wheeler loans, so you can expect the interest rates anywhere between 8% to 12% depending upon the bank. We recommend always opting for a two-wheeler loan offered by a government bank.

2. Easy And Fast Approval

Compared to personal loans, you can get your two-wheeler loans approved and issued way faster. When you apply for a personal loan, banks take more than 48 hours to approve the loan and issue the loan amount. On the other hand, your two-wheeler loan can get approved within the same day if you provide all the required documents and a quotation from the bike or scooter dealer. For sure, you’ll be asked to submit the income proof, it helps banks verify that you are able to pay the loan amount with the interest on time.

3. 85% to 90% Coverage Of Bike/Scooter’s Total Price

For example, if you are buying a 1 lakh rupee scooter or bike, and if you apply for a two-wheeler loan, then the loan amount can cover 85% to 90% of the bike’s price. In this case, the bank can approve your loan and issue the loan amount of anywhere between 85,000 to 90,000 rupees. And the rest you have to manage by yourself. Not just that, if you are eligible, the bank can issue a loan amount of up to 2.5 lakh rupees. And the minimum two-wheeler loan amount is 30 thousand rupees. The loan amount factor also depends upon the bank you are choosing.

4 Repayment Flexibility

Almost all the two-wheeler loans provided by banks offer great repayment flexibility. You get the EMI option for paying the loan amount in installments with monthly interest. This way, you can not only have more freedom but also can reduce the burden on your budget. Depending on the bank, you can decide how many EMI installments you are comfortable with, which can go as high as 36 months with some banks.

5. Ownership

If your CIBIL Score is good then you own the vehicle from the moment you purchase it, even if you are paying off the loan in installments.

? Two Wheeler Loan Disadvantages

Here are some cons of taking two wheeler loan:

1. CIBIL Score Impact

Same as other loan options where you submit your PAN card as the identity proof, with two-wheeler loans, it can impact your CIBIL score in a negative way if you don’t pay installments on time. But most people don’t face this issue with a two-wheeler loan because it has lower interest rates and a flexible repayment schedule. By opting for a two-wheeler loan for a longer period, you can decrease the monthly installment amount, however, it will cost you a little extra in the end.

2. Two Wheeler Security

Security shouldn’t be a huge concern for you if you are paying your monthly installments on time. However, if your installments are due from the last few months, then the bank can reclaim your two-wheeler and sell it off or list it for auction. Most banks in India follow these procedures to cover up the loan amount issued to you. However, before taking such action, banks have to notify you by sending an LRN or Legal Recall Notice at least 15 days prior.

3. Depreciation

Two-wheelers depreciate in value quickly, and you may owe more on the loan than the vehicle is worth, especially in the initial years of ownership.


Alright, now you know whether you should opt for a two-wheeler loan or not. In our opinion, it is a much better option than financing your bike/scooter from private finance companies or taking a personal loan for it. So definitely research interest rates, repayment flexibility, documents required, and other aspects of various banks before applying for a two-wheeler loan.

Two Wheeler Loan Frequently Asked Questions

Q1. Is It Possible To Get A Two Wheeler Loan Without A Good Cibil Score?
Ans: Well, having a good score can increase your chances of getting approved, but even if your credit score isn’t top-notch, you still have options. Some lenders offer loans designed specifically for people with low credit scores, and they may just require a bit more documentation or collateral to secure the loan.

Q2. What If I Use The Two Wheeler Loan To Purchase A Second-Hand Vehicle?

Ans: You can definitely use a Two Wheeler Loan to purchase a used vehicle. However, keep in mind, that the loan terms may differ from those of a loan for a new vehicle. You might need to adjust your loan amount or interest rate expectations, but with some smart shopping and careful consideration, you can still snag a great deal on a used bike.

Q3. Are There Usually Any Additional Benefits Included Such As Free Insurance Or Discounts On Accessories With A Two Wheeler Loan?

Ans: When it comes to Two Wheeler Loans, some lenders sweeten the deal by offering additional benefits such as free insurance or discounts on accessories. So, before you sign on the dotted line, make sure you look around to find a loan that not only meets your needs but also comes with some extra perks.

Q4. What If I’m A Freelancer Or A Student, Can I Still Get A Two Wheeler Loan?

Ans: While the eligibility criteria and documentation requirements may differ from those of a salaried, employee, there are options available to you as a freelancer or a student. Just be prepared to provide proof of income or enrollment, and remember to check with the lender for their specific requirements.

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Sumit Kumar Yadav has experience analyzing business and finance of big to small companies. Loan, Insurance, Investment data analysis are his key areas.