(This article was originally published on the 13th of February 2018 and updated on the 17th of March 2021).
As far as private vehicles go, the main options are usually either cars or motorcycles. Given the high car prices in Malaysia, motorcycles offer a cheaper alternative to consumers seeking to acquire personal transportation.
Nevertheless, every prudent consumer would ponder the same question:
How should I finance my motorcycle? Motorbike loan or personal loan?
Hire Purchase Financing
The conventional financing mode for motorcycle purchase is via motorbike loan due to its lease-to-own scheme. Consumers are able to utilise the vehicle while paying installments, although they do not gain ownership until the full amount has been paid. Interest (or profit rates under Islamic banking) and tenures may differ depending on the type of motorcycle purchased.
Below is a typical financing package offered under the AEON Credit Motorbike loan (the information disclosed is accurate during the period it was written).
| Type of Motorcycle | Interest/Profit Rate Monthly | Maximum Tenure | Margin of Finance |
| Moped (<250 cc) | From 0.83% | Up to 60 months | Up to 90% |
| Superbike (>250 cc) | From 0.40% | Up to 84 months | Up to 90% |
Personal Financing – Another Option?
Meanwhile, an alternative financing channel for your motorcycle purchase is through personal loan, whereby consumers borrow the required funds from financial institutions and pay installments for the personal loan instead.
Advantages of Personal Loan
- Full ownership of the motorcycle (purchased through cash from dealer)
- Longer maximum tenure can be up to 120 months
- Lower monthly installments (loan distributed over a longer period of time)
Nevertheless, a caveat of personal loan financing is its dependency on the consumer’s personal credit history like CCRIS & CTOS and loan eligibility. Applicants opting for personal financing are subjected to credit checks and stringent requirements, in addition to a potentially long wait for funds.
For example, Co-op Bank Pertama offers a personal loan with a promotional interest rate as low as 2.69% (for financing up to 3 years) and 2.99% (4-10 years). Assuming that the profit rate is 2.99% per annum, on a monthly basis the profit rate is 0.25% monthly.
Comparing Motorbike Loan vs Personal Loan
Here we use 2 examples – a new 250cc bike and another new 650cc superbike using motorbike financing (from AEON Credit) and personal financing (from Co-op Bank Pertama) to compare which one is more worth it and cheaper.
Example 1: Purchasing a 250cc Honda CBR250RR Motorcycle (2021) at RM25,999
| Motorbike Loan | Personal Loan | |
| Monthly Profit Rate | 0.83% | 0.25%** |
| Tenure | 60 months | 60 months |
| Interest Payable (RM) | 25,999 x 0.83% x 60 = 12,948 | 25,999 x 0.25% x 60 = 3,900 |
| Interest Savings (RM) | 12,948 – 3,900 | = 9,048 |
| Total Payable (RM) | 25,999 + 12,948 = 38,947 | 25,999 + 3,900 = 29,899 |
| Monthly Instalment (RM) | 38,947/60 = 649 | 29,899/60 = 498 |
**This is an estimation of the monthly profit rate. The promotional rate is between 0.22- 0.25% and the approved rate would depend on the credit profile and history of the borrower.
Personal loan is cheaper – In this case, the consumer saves RM9,048 by financing the purchase of this bike through a personal loan and the monthly installment is also close to RM150 lower per month by using a personal loan.
Example 2: Purchasing a 650cc Honda CB650R Motorcycle (2021) at RM43,499
| Motorbike Loan | Personal Loan | |
| Monthly Profit Rate | 0.40% | 0.25%** |
| Tenure | 84 months | 84 months |
| Interest Payable (RM) | 43,499 x 0.40% x 84 = 14,616 | 43,499 x 0.25% x 84 = 9,135 |
| Interest Savings (RM) | 14,616 – 9,315 | = 5,301 |
| Total Payable (RM) | 43,499 + 14,616 = 58,115 | 43,499 + 5,301 = 48,800 |
| Monthly Instalment (RM) | 58,115/84 = 692 | 48,800/84 = 581 |
**This is an estimation of the monthly profit rate. The promotional rate is between 0.22 – 0.25% and the approved rate would depend on the credit profile and history of the borrower.
Personal Loan is cheaper – In this case, the customer saves RM9,315 by financing the purchase of this motorcycle with a personal loan, and the monthly installment is about RM111 lower per month by using a personal loan.
Conclusion
Is personal loan a better option to finance your motorcycle purchase in Malaysia? It might be, from the perspective of a lower monthly repayment. The answer will also depend on your own credit profile and your access to credit. As a smart consumer, you should assess all possible options before deciding on the facility that suits your financing needs. Try exploring different personal financing options. It might be well worth the time.
If you conclude that a personal loan is the best way to buy motorcycle and you are a civil servant, check your loan eligibility with Direct Lending. Our service as always is 100% free. No upfront or processing fees. Receive your funds as fast as 2 working days!
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