Categories: Auto Loans & Financing
7 Motorcycle Financing Tips for Beginners
For beginner riders, nothing beats the excitement of hitting an open road on a two-wheeler to explore the world's great rides. It's hard to compare the sense of freedom that a motorbike offers.
For beginner riders, nothing beats the excitement of hitting an open road on a two-wheeler to explore the world's great rides. It's hard to compare the sense of freedom that a motorbike offers. In addition, people are purchasing motorcycles more than ever, not just because they are an excellent alternative means of transport, but due to the thrill, they offer riders.
However, although a motorbike can offer a rush of adrenaline, there are a few factors to consider when shopping for your first motorcycle. Here are some motorcycle financing tips for beginners to help you get the best loan available.
1. Get pre-approved for a motorcycle loan
Before you lose your heart on a new motorcycle, take time to find out what loans you qualify for, depending on your credit score and monthly income. This step might seem obvious, but it can save you lots of hassle, as you will know what you can afford before visiting your local showroom. A general rule of thumb is that your loan payment should not exceed 15% of your monthly net income.
Remember, most lenders need you to maintain full-coverage insurance until the loan is repaid. Therefore, ensure you include the cost of premiums in your motorcycle budget. Besides helping you to keep on budget, getting pre-approved for a motorcycle loan gives you more bargaining power at the dealership.
2. Make a down payment
Making a down payment can help you reduce your motorcycle loan rates. Ideally, most lenders require you to put down 10% - 20% of the loan amount. For instance, if you are looking at a beginner motorcycle that costs $10,000, your down payment will be between $1,000 and $2,000. However, the more down payment you put down, the lower your interest rate will be. Moreover, making a larger down payment makes you appear a less risky borrower, especially if you have a bad credit score.
One of the best ways to save for a down payment is to open a dedicated savings account and automate your contributions. Alternatively, you can set up a monthly automatic transfer from your bank or checking account to your savings account. Keep checking your savings to know when you are ready to begin shopping for two-wheeler loans.
3. Review your credit score
Since most are unsecured, motorcycle loans are considered to be a higher risk by lenders than auto loans. Therefore, an error-free credit report and a good credit score are essential to securing motorcycle financing and getting the best motorbike loan rate possible.
Request a copy of your credit report from any of the three leading credit reporting agencies; Experian, TransUnion, or Equifax. Check your credit report for errors and incorrect information, and ensure it's up to date.
Loan providers usually consider the level to which you are already in debt. Therefore, ensure you pay all your bills on time, including rent, credit card, and utilities. If you have any late payments or collections accounts, talk with your lender to get them removed from your report before you apply for a motorcycle loan. When you have a clean credit report and your score is above 700, you are assured of getting a significant loan.
However, don't despair if your credit score is bad. There are a few steps you can take to improve your credit rating.
4. Know the basics of each financing agreement
Securing a motorcycle loan can be overwhelming, especially if you aren't a financial expert. Therefore, it's good to understand a loan agreement's basic terms before choosing a lender. Consider some aspects such as loan terms, interest rates, late repayment penalties, and the required down payment.
Furthermore, inquire whether the interest rates are variable or fixed and determine the charges you will incur if you repay the loan early. These details will help you compare different loans and determine the one that meets your financial situation.
5. Short around for the best motorcycle insurance quotes
Besides the bike itself, you will need to purchase motorcycle insurance. It's required in most states, so you should consider it before purchasing your first motorcycle and add this to the monthly payment you can afford.
Motorcycle insurance policies differ, so be sure to shop around for the most affordable bike insurance quotes. Be sure to take out comprehensive motorcycle insurance that safeguards you and your bike in case of a road accident and covers injured people or damaged properties.
You may also want to purchase extra coverage to get protection from theft and motorcycle damage caused by natural disasters such as fire. Consider the value of your bike so that you can find the best coverage for your investment.
6. Look for the shortest possible loan term
Short-term loans are usually better for your financial health when it comes to financing a motorcycle. Motorbikes lose value quite faster than cars, so you might end up owing more than your bike is worth when you take a loan with a longer repayment term.
A short-term loan makes good financial sense if you can afford it. Although short-term loans have a higher equated monthly installment (EMI), these loans come with less interest rate than long-term loans. However, always do your math before making any financial decision. Long-term loans with reduced, fixed interest rates can be an excellent option if you repay them early. Just be sure to consider whether there are any penalties for early loan payoff.
7. Choose a reliable lender
Taking a loan involves two people with mutual benefits. If your potential lender wants to ensure your credibility, you must do the same. Look for a flexible and considerate lender or financial institution that considers your needs.
Compare rates and terms from multiple lenders, and be sure to submit at most six applications. Applying to more than six lenders can negatively affect your credit score.
Wrapping it up
Getting your first motorcycle is an exciting experience, but securing an easy loan makes the adventure even smoother. The most important thing to know is how much you can afford before you begin shopping for your new motorcycle and considering any insurance costs. This will save you much time and ensure a hassle-free motorcycle financing experience.