Owning a motorcycle is just one of the many dreams that the young have in their mind. They are willing to do just about anything to own the new swanky sports bike or the macho cruiser that gleams in the showroom. Motorcycle loans seem to be the easiest ticket to a motorcycle. But it can actually land you in a financial mess if you do not choose the correct loan program and fall prey to one of the high interest rate programs available nowadays. So what exactly is the right way to look for motorcycle loans?
Choose the Loan first
Before you select one of the costliest motorcycles for yourself, see what amount of motorcycle loan you qualify for. If the lender is only willing to lend you $9000 and you have chosen a motorcycle that costs $15000, then you are digging a big grave for yourself. So, the bottom line is to choose the loan before you choose the motorcycle for yourself.
Searching for the loan
You need to search around a bit before you get a loan with interest rate that you like. Credit institutions, banks etc are good places to start your hunt. If you directly go for a loan from within a motorcycle showroom, then you will get a loan that charges you a much higher interest rate than conventional motorcycle loan programs.
The Term of the loan
Lenders will always invite you to sign up for a loan program with a long term. Some loan programs go as long as 72 months. This seems like the most affordable and attractive proposition out there. It has low monthly payments, a fixed rate of interest etc. But there is a negative side to this. In such a long time period, you end up paying more than what your motorcycle is worth. You definitely do not want your debt to exceed the value of the motorcycle. Do you? Most borrowers find themselves in such a situation after sometime.
The Rule of 78 and Simple Interest
These are two methods by which the lender determines the rate of interest that he would pay. You need to look at this before you sign up for the loan program. Simple interest is always the better option from the borrower's point of view and vice a versa. In simple interest, the interest is calculated on the basis of the balance of the loan. You need to take care that the term is reasonably long but not too long. In the rule of 78 you only pay the interest for the first couple of years. So you have no equity on your vehicle. So you should always look for a lender who will give you simple interest on your loan. Some lenders also offer a mixture of the two. These loan programs have the rule of 78 in the first few months of the loan and then move on to simple interest.
Fixed and Variable Rate of Interest
The rate of interest can be tricky as well. It may be a fixed rate of interest or a variable one. The fixed one is the safer option. Please ask the lender beforehand itself whether there are any circumstances which may cause the rate of interest to jump. If there are any such circumstances, it is better if you know it beforehand itself. The more questions you ask the lender, the better you will feel about the whole program. Some lenders increase the rate of interest if the payment is delayed for a couple of months.
So play it safe and select the right loan. Hope you have a great time on your motorcycle.
Motorcycles can often be too expensive for those who want them. While there are people who can manage to pay for their motorcycles with large down payments or complete cash, most people cannot manage to do that. Most people who want a motorcycle must take out motorcycle loans to be able to afford buying one. Motorcycle loans, like any other debt, can be risky, depending on the situation. You need to make sure that you are knowledgeable on the situation to understand the risk that you are taking by pulling out the motorcycle loan that you need to afford the motorcycle itself. While there are multiple small factors that can affect your decision on whether or not to pull out a motorcycle loan, there are three major things to consider.
1. How Much is the Motorcycle
The major thing to consider is how much the motorcycle costs. While it is obvious that different kinds of motorcycles have different prices, the motorcycle loans that you may need for different kinds of motorcycles can differ greatly. If you take two motorcycles and put them side by side, the cost to finance a motorcycle loan for each may be different. It is important to understand not only exactly how much the motorcycle is worth, but how much the cost will be per month. Knowing the exact price can help you to budget appropriately and understand if you can afford it.
2. How Much Can You Afford?
After you calculate how much the motorcycle will cost, you need to figure out what you can afford. Because of the way that motorcycle loans can be paid off, you need to figure out how much extra money you have to spend per month, and how much the motorcycle loans will cost per month. Knowing these two things can help you to determine if the motorcycle you are looking at is in your price range. If a motorcycle is going to take up all of your extra money, you may want to look for a different motorcycle loan, or a different motorcycle that may cost less.
3. How Long will it Take Me to Pay it Off?
The third and final major factor in motorcycle loans is the time that it will take you to pay off the loan. Different loans have different time spans in which you can pay them off. The shorter the motorcycle loan is, the more you have to pay per month. While it is true that you can lengthen a motorcycle loan to make the monthly payments smaller, this can only go so far; there is a limit to the number of months that you can make your motorcycle loan go. When considering a motorcycle loan, make sure that you have calculated not only how much it will cost you, but how long you will be paying; many people may not want to pay a high price for a longer number of years, and this could affect their motorcycle loan decision.
Both Daniel Wesley & Justin Stewart are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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