Two-wheeler loan and Car loan, are both same? Know the difference

Two-wheeler loan and Car loan, are both same? Know the difference

Loans by Team Drivio | 5 Apr 2023

Although many borrowers think that the eligibility criteria for obtaining a motorcycle or a car is the same, lenders are more stringent about car loans. Given that cars are expensive, these loans come with stricter eligibility criteria.

Whether you are a motorcycle enthusiast or a car lover, you might be exploring different loan options before finalizing your purchase decision. Well, both car loans and motorcycle loans come under the ambit of vehicle loans. Thanks to easy loan processing criteria with reputed banks and NBFCs, most buyers count on these financial privileges. Besides, online loan processing has further simplified the disbursal mechanism.

One of the common misconceptions is the fact that obtaining a two-wheeler loan requires the same eligibility as a car loan, given that both are vehicles. However, there are some visible differences in the eligibility criteria, rate of interest, and loan repayment tenure. 

To help you with your loan comparison, we have elucidated the differences between a car loan and a two-wheeler loan in this article.

What is a vehicle loan?

A vehicle loan is a broad concept that includes both car loans and two-wheeler loans. Typically, the creditor, who happens to be a bank or an NBFC, lends money to the buyer. These financial institutions transfer the funds directly to the seller on the behalf of the vehicle owner.

Like any other loan, a car loan or a motorcycle loan comes at a specified interest rate. The borrower is liable to pay off the loan within the stipulated timeframe. Each month, you need to shell out an EMI throughout the tenure of the loan to clear it off. Once the two-wheeler loan is fully paid off, the vehicle gets registered under your name.

Your monthly income and credit score largely determine your eligibility for a car loan or a bike loan. With most lenders, you can qualify for 75% to 100% of the on-road price of the vehicle, based on its price and features.

Besides, vehicle loans are also available to purchase previously owned motorcycles and pre-owned cars.

Explore your loan options: Motorcycle Loan vs Car Loan

A two-wheeler loan is a different product from a car loan. Practically thinking, you would realize that cars cost much higher compared to motorcycles. Naturally, creditors would be more stringent to process loans to purchase cars, compared to bikes. 

With fuel prices increasing, the demand for two-wheeler loans is on the rise. Most owners find it easier to qualify for a motorcycle loan than a car loan. 

As we talk about loan comparison, let’s explore how each loan differs from the other.

  • Lenders charge a different rate of interest for bike and car loans
  • Since cars are expensive, borrowers need more time to clear these liabilities
  • Purchasing a car requires a sizable investment, which makes the eligibility criteria stricter
  • The loan amount that banks and NBCCs sanction for cars is higher than that for bikes

How do two-wheeler loans differ from car loans?

We have presented you with a practical loan comparison based on three parameters: eligibility criteria, interest rate, and loan tenure.

     1. Eligibility criteria 

Before lending out any sum to a borrower as car loans, banks tend to remain on the safe side. They look for an assurance that you will pay off the loan. So, they check your credit record, payment pattern, financial habits, past loan repayment history, and current liabilities.

However, motorcycles are not as expensive as cars. The application process is rather simple, and the eligibility criteria isn’t too demanding to fulfill. Typically, banks and NBFCs require fewer documents to process two-wheeler loans compared to car loans.

Therefore, you can easily qualify for a motorcycle loan. In case your credit record isn’t in good shape or you have too many ongoing liabilities, qualifying for a car loan may turn out to be a challenge.

    2. Loan tenure

Loan tenure refers to the duration or the number of years by which the lender expects you to clear the loan. The longer the loan tenure, the higher would be the risk to which the lender exposes itself. Naturally, loans with longer tenures come with higher interest rates to mitigate this risk.

The typical loan tenure for a two-wheeler loan is two to four years. For cars, this tenure can range up to seven or even ten years.

Given that purchasing a car requires the owner to take a larger loan, the loan tenure tends to be longer. Particularly, if you want to keep your EMIs low. You can go for a longer tenure. However, a longer car loan tenure implies you would be shelling out more money in the form of interest.

     3. Rate of interest

In general, the rate of interest on two-wheeler loans tends to be lower than that on car loans. As we explained, a longer loan tenure invites risk for the creditor. Banks and NBFCs charge a higher rate of interest while disbursing car loans since the borrower needs at least four to five years to clear the loan off. On the other hand, you can even clear off a two-wheeler loan in a couple of years.

The interest rate you need to pay largely depends on the policies of the lender. Even the same lender may offer loans at different rates of interest for each bike model. Premium bikes, which cost higher than the ordinary ones, sometimes involve lower interest rates. Considering that the sum is large and the borrower would close it in a few years, lenders slash the interest rate. However, they manage to keep a healthy profit margin since the interest on an expensive bike (higher loan amount) would be more than the ordinary ones.


 Whether you decide to purchase a bike or a car, make sure to research on the leading lenders. This way, you can qualify for the loans at a reasonable rate of interest. Moreover, look out for hidden expenses like processing fees, late payment charges, and pre-closure fees. It would be wise to approach an established bank or NBFC for your car loan or two-wheeler loan. 

Now that you know the differences between these two popular types of loans, you can weigh your eligibility and settle for the right kind of automobile.