Motorcycles are a great way to get around, and when you finance one, you can enjoy the ride even more. Here are four things to keep in mind when taking out a motorcycle loan:
1. Your credit score is important.
Your credit score will play a big role in determining the interest rate on your motorcycle loan. If you have a good credit score, you’ll get a lower interest rate, which will save you money in the long run. Before applying for a loan, make sure that you check your credit score and history first. Not only is it helpful to have an idea of what your credit score is and the types of loans/rates you’ll be eligible for, but it’s also a good opportunity to check that there aren’t any errors or mistakes on your credit file (and if there are, you’ll be able to fix these before applying for any loan!).
2. You can choose between a fixed or variable interest rate.
A fixed interest rate is locked in for the life of the loan, while a variable interest rate can change over time. Which one is right for you depends on your personal preferences and the current interest rate environment.
3. You can finance a new or used motorcycle.
Whether you’re looking to buy your motorcycle brand new from the dealership, or second hand from an online private seller, there are finance options available to you. If you’re looking at buying a newer motorcycle (ie: 2013 or later), you’ll probably be looking at getting a secured loan. With this type of loan, your bike will be used as collateral against the loan – meaning that if you default on your loan your lender will be able to repossess your bike to recover their funds. Because you’re giving your lender a large amount of security, you’ll normally be eligible for a lower interest rate.
If you’re looking at buying an older motorcycle (ie: 2012 or earlier), you’ll likely be looking at getting an unsecured loan. This doesn’t require you to use your bike (or any other asset) as collateral against the loan. While this means your lender won’t be able to immediately repossess your bike if you can’t meet your repayments, you may face legal action from the lender. Unsecured loans are typically accompanied by a higher interest rate because lenders don’t have the same amount of security that they do with a secured loan.
4. You can choose a loan term that best suits you.
A loan term is the number of years you have to repay your motorcycle loan. The longer the loan term, the lower your monthly payments will be – but you’ll end up paying more interest overall. Shorter loan terms mean higher monthly payments, but you’ll pay less interest over the life of the loan
When you’re choosing your loan term, it’s important to think about how much you can afford to repay each month, and how long you want to be paying off your motorcycle loan for.