Is Bike Loan Secured or Unsecured?

When planning to purchase a two wheeler, paying the entire cost in one go can be a daunting experience. Most people opt for a bike loan so that the bike becomes economical for them. But before applying, you have to know whether the two wheeler loan is secured or unsecured. Both forms of loans operate differently, and making the right decision might affect your repayment terms, interest rates, and lending experience.

This guide describes both loans, how they work, their advantages and disadvantages, and which one of them could suit you better. If you’re considering taking a two wheeler loan, read this guide and make your choice.

Meaning of Secured Bike Loans

A secured bike loan is a loan in which the bank seizes the vehicle as collateral. The bank can take your bike if you default on the loan payment. Because the bank has collateral (the bike), it charges less interest and offers a flexible payment scheme.

How a Secured Two Wheeler Loan Works?

• The lender approves the loan and uses the bike as collateral.
• You make regular EMI payments until the entire loan amount is repaid.
• If you miss multiple payments, the lender can take back the bike.
• Once you pay off the loan, the bike becomes entirely yours.

Pros of a Secured Bike Loan

• Lower Interest Rates – Since the lender has collateral, they offer lower interest rates.
• Easier Approval – Even if you have a low credit score, lenders are more willing to approve a secured loan.
• Higher Loan Amount – You can get up to 100% financing of the bike’s on-road price.
• Flexible Tenure – Repayment periods can last 48 months, making EMIs affordable.

Cons of a Secured Bike Loan

• Risk of Losing the Bike – If you default, the lender can repossess your two-wheeler.
• Ownership with the Lender – Until you pay off the loan, the lender holds ownership of the bike.

Most banks and NBFCs in India offer secured loans, making them the most common type of two wheeler loan.

Meaning of Unsecured Bike Loans

An unsecured motorcycle loan is a loan that is not secured. The loan is given based on your credit history, income, and repayment track record. Since there is no security, these loans carry higher interest rates and more stringent eligibility criteria.

How an Unsecured Bike Loan Works?

• The lender checks your CIBIL score, income stability, and job history.
• If you qualify, the loan is approved without requiring your bike to be secured.
• The interest rate is higher than a secured loan since the lender takes more risk.
• If you fail to repay, the lender cannot seize your bike but may take legal action to recover the money.

Pros of an Unsecured Motorcycle Loan

• No Risk of Losing the Bike – Since the bike is not collateral, it remains in your name from day one.
• Faster Process – If you have a high credit score, approval is quick.
• Good for Those Without Collateral – If you don’t want to pledge your bike as security, this is a good option.

Cons of an Unsecured Motorcycle Loan

• Higher Interest Rates – Can be 2-5% higher than secured bike loans.
• Stricter Eligibility – You need a high credit score (750 or above) and stable income.
• Lower Loan Amount – The approved loan amount is often less than the bike’s full cost.

Unsecured bike loans are less common in India, but some private lenders and banks offer them to high-income individuals with strong credit histories.

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Secured or Unsecured Bike Loan: Which One is Better?

The decision between a secured two wheeler loan and an unsecured motorcycle loan depends on various considerations.

A Secured Two Wheeler Loan is a Better Choice If:

• You want lower interest rates and manageable EMIs.
• Your CIBIL score is average, and you need easier loan approval.
• You need a higher loan amount that covers the full cost of the bike.
• You’re okay with the lender holding ownership of the bike until the loan is repaid.

An Unsecured Motorcycle Loan is Suitable If:

• You have a CIBIL score of 750+ and a stable income.
• You don’t want to pledge your bike as security.
• You’re comfortable with higher interest rates for quicker loan approval.

A secured bike loan is the better option for most buyers due to its affordability and accessibility. Low interest rates and longer repayment tenures make owning a bike easier.

Factors Affecting Bike Loan Approval

Whether you apply for a secured bike loan or an unsecured motorcycle loan, lenders consider a few important factors before approving your loan.

• CIBIL Score: A score above 700 increases your approval chances.
• Income Stability: Salaried individuals with consistent monthly earnings get faster approvals.
• Existing Loans: If you already have multiple loans, lenders may hesitate to approve another.
• Loan Tenure: Shorter loan terms have higher EMIs but lower overall interest payments.
• Employment Type: Government employees and individuals with stable private-sector jobs get better loan offers.

If you’re unsure about eligibility, use a two wheeler loan EMI calculator before applying. It helps estimate your monthly repayments based on loan amount, interest rate, and tenure.

Two Wheeler Loan Interest Rates & Finance Options

Interest rates depend on whether the loan is secured or unsecured.

• Secured Two Wheeler Loan – Interest rates start from 0.99% per annum.
• Unsecured Motorcycle Loan – Interest rates are higher, typically starting at 12% per annum.
• Processing fees vary between 1-4% of the loan amount.
• Special loan schemes are available for women and first-time buyers.

Muthoot Capital offers bike financing solutions with low interest rates and flexible repayment plans. Whether you need full financing or a part loan, Muthoot Capital makes the process hassle-free with quick approvals and minimal paperwork.

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Conclusion

A bike loan may be secured or unsecured, but in India, secured loans are generally preferred because they offer better interest rates, larger loan amounts, and simpler approval procedures. The lender takes possession of the bike until the loan is completely paid. Thus, secured loans are a favourite among first-time buyers and people with median credit scores. At Muthoot Capital, we offer hassle-free financing with less paperwork and rapid approvals so your dream bike can reach your doorstep without burning a hole in your pocket.