So, you’ve found the perfect bicycle and now you just need to work out how you’re going to pay for it. When it comes to financing, you may come across secured and unsecured loans.
But what’s the difference and which one is right for you? In this article, BikePay explains how each option works so that you can choose finance that aligns with your budget and preferences.
What Is a Secured Bike Loan?
A secured bicycle loan uses an asset as security against the amount you borrow. Depending on the lender, the bicycle you’re purchasing can be used as security.
Because the lender has an asset as security, secured loans usually have lower interest rates than unsecured loans. This can make them an appealing option if you want to reduce the overall cost of your bicycle finance.
However, there is a trade-off. If you fail to meet your repayments, the lender may be able to repossess the asset to recover the outstanding debt.
What Is an Unsecured Bike Loan?
An unsecured bicycle loan allows you to borrow money without listing an asset as security. This means your new bicycle isn’t used as security for the loan. However, you are still responsible for making repayments and the lender may take action to recover any unpaid debt.
Because there is no security for the lender to fall back on, unsecured bicycle loans usually come with higher interest rates. Your eligibility may also depend on factors such as your income, expenses and credit history.
Secured vs Unsecured Bike Loan: Which Is Better?
This table gives you a quick comparison of secured and unsecured bicycle personal loans:
| Secured Bicycle Loan | Unsecured Bicycle Loan | |
| Security Required | Yes | No |
| Interest Rate | Generally lower | Generally higher |
| Asset Used as Security | Yes | No |
| Potential Benefit | Lower overall borrowing costs | No asset required as security |
Final Thoughts: What to Consider Before Choosing
No matter what financing option you choose, make sure you can realistically handle the monthly repayments. Take the time to compare interest rates, fees, loan terms and the overall cost of borrowing.
Remember that there isn’t any rush to sign on the dotted line and a little extra research can go a long way.
Whether you’re considering a secured or unsecured bike loan, BikePay can help you compare your options and find financing that suits your needs and budget. Apply today to get started.