Personal Loan vs Bike Loan: Which One Makes Sense After GST Reform

The choice between the loans depends on the type of bike you intend to buy. The key differences are outlined in the table below for an easy comparison:

Also Read: Small Cars to Luxury Goods: The New GST Hierarchy Explained

Making the Final Decision: Which Loan is Right for You?

Between a Personal Loan and a Bike loan, your choice will depend on what you intend to do and your financial situation under the new GST structure.
Choose a Personal Loan if:

●    You intend to buy an expensive bike in 2025, which will now be costlier due to the GST.
●    You value flexibility and want to use the funds for the bike, accessories, and other costs.
●    You prefer simpler ownership terms without hypothecation on your vehicle’s Registration Certificate (RC) and the need to put it up as an asset.
●    The higher total cost results in a steep down payment that could drain your funds.

Choose the Bike Loan if:

●    You’re buying a bike up to 350cc.
●    You’re fine to get financing for just the vehicle, with no extra money.
●    You have enough money for a down payment.
●    You’re confident in your repayment ability and in having your bike pledged as an asset.
●    You’d prefer easier approval (particularly helpful if you have a low credit score).

Also Read: Personal Loan Terms You Must Understand

The Approval Process and Required Documentation

Regardless of the type of loan you take, the application process is now more straightforward since it has been digitised. For both types of loans, you’ll usually need to provide the following documents:

●    Know Your Customer (KYC) Documents: Proof of identity and address, e.g. Aadhaar Card, PAN Card.
●    Proof of Income: Present salary slips, bank statement records, or Income Tax Returns, underlining your ability to pay.

In the case of a Bike loan, you must present some additional documents, and the approval process is likely to take longer. You’ll need to submit the proforma invoice for your vehicle, issued by the dealership, as the loan is disbursed on that asset. On the other hand, Personal Loan approval rests much more on your personal credit profile and financial background. 

Also Read: Instant Personal Loan to Buy a Used Bike

To Conclude

Now that you have an idea of what precisely the prices will look like, look for lenders who can understand your needs and give you the best offer possible. Use an eligibility calculator to check if you’re eligible, and feel free to contact the lender for additional clarification.

Poonawalla Fincorp offers Personal Loans of up to ₹50 Lakh, alongside competitive interest rates and flexible tenures, making it ideal to purchase your dream bike. Apply today!

Frequently Asked Questions

How do the new GST rates affect the price of a specific bike model?
Bikes with engines up to 350cc are now cheaper, as GST has been reduced from 28% to 18%. For bikes above 350cc, prices have increased because the tax has risen from 28% to 40%.

Is a Personal Loan always more expensive than a Bike Loan?
Not always. Bike loans usually have lower interest rates since the bike is kept as security. But if you have an excellent CIBIL score and repayment ability, you might get a Personal Loan at a competitive rate.

Can I use a Bike Loan to pay for accessories and insurance?
A bike loan only covers the ex-showroom or on-road price of the bike, which is usually around 80% of the total cost. You’re also expected to pay a down payment as an investment from your end. If you also want to pay for accessories or other expenses, a Personal Loan is better.

What happens if I default on a Bike Loan?
Since a bike loan is secured, the lender will have the right to repossess the vehicle to recover the outstanding loan amount if you fail to make payments as per the agreement.

Which loan gets approved faster?
Both loans now have fast, primarily digital approval journeys. However, with a pre-approved Personal Loan offer, the disbursal could indeed be faster, as there will be no involvement of vehicle documentation and hypothecation procedures.

Does the bike belong to me if I take a Bike Loan?
Yes, you are the owner of the bike. However, the vehicle’s Registration Certificate (RC) will carry an entry known as hypothecation that states the lender’s financial interest in it. This entry is, however, taken off when the loan is fully repaid. If you default on the loan, the lender has the right to repossess the bike.