What Is A Good Rate For Motorcycle Finance
Every guy wants to ride a gorgeous motorcycle, but when it comes to buying one, the price tag is the biggest hurdle. Even the more affordable models can require a sizeable investment.
Today’s economy makes it difficult to go on about the daily chores, and the thought of spending it all at once makes your heart skip a beat. Many decide against fulfilling their desire to ride a bike after looking at their pockets. Fortunately, motorcycle financing allows one to buy a high-end motorcycle without hassle.
Is Motorcycle Financing The Same As Car Financing?
Motorbike financing is a type of financial assistance that enables you to borrow money from a lender to buy a motorcycle without paying cash upfront. Instead, you will make monthly payments to the lender for principal and interest over a predetermined period.
Car and motorcycle financing are both installment fund types with set interest rates. However, a motorcycle costs significantly less than a car, so they tend to have lower interest rates.
What are the requirements for financing a motorcycle? The blog explores the answer to the question and highlights what is needed to finance a good motorbike.
Requirements For Financing A Motorcycle
Before financing a motorcycle, the first and most important thing is to be updated with the research and do your homework. When considering this option, make sure you are putting in all your efforts from your end. Start by finding the model based on why you want that particular motorcycle. This way, options can be filtered, and you can only focus on the models that fit your needs.
After doing that, financing can be challenging if you’re unaware of the terms and technicalities. It has several terms and restrictions attached to it. Let’s look into the requirements for financing a motorcycle.
A credit score plays an essential part in acquiring financing for a motorbike. Your credit score should also stand out if you want a good model. In short, the future of your motorcycle financing is in the hands of your credit score. The more impactful it would be, the fancier bike you can get. So, ensure that your credit score is solid; if not, try to improve it.
Then the next is your credit history. It is a report generated by analysts that gives a proper idea of your expenditures and how much you have taken and returned. It tells everything - how much debt you have, how long you’ve had credit, and how frequently your payments were on time.
Hence, having a good and clean history is very vital. However, if you are facing some trouble and have a shaky credit history, there are ways through which you can improve it. This history is thoroughly examined as the lender obtains a copy of your credit report to review your credit history.
Once your credit history checks out to the lender’s satisfaction, the next step is the down payment. It is the amount that you must pay as a token in the initial phase of your motorcycle financing. It is the sum you put down as a down payment on your financing option. For instance, if you’re buying a $20,000 motorcycle, you might need to pay $4,000 to $5,000 as an initial payment. Larger down payment lowers your required borrowing capacity and may result in more favorable loan terms.
Condition Of The Motorcycle
Then it is the condition of your motorcycle. If the bike is in good condition, the price will be higher comparatively. The lender will evaluate the bike’s value in relation to the amount he is paying. Using this math, you can tell if you’re paying a fair amount.
Other than condition, another major factor is the two-wheeler’s age. Either is it a brand new model or a used one? Although a new motorcycle may be more expensive, it is more likely to withstand deterioration than a used motorcycle. Conversely, a comparable secondhand motorcycle usually costs less than a new one.
Does Motorcycle Finance Have Higher Interest Rates?
Motorcycle financing is frequently a short-term program, and interest rates are minimal. However, everyone knows that the interest rate increases with time and is typically higher on financing options with a lengthier duration.
There are a couple of factors that affect the interest rate directly. Those key factors are listed below:
Risk And Inflation
Risk and inflation are the two main reasons that cause interest rates to increase. For a lender, shorter financing plans pose a lower default risk. In addition, short-term financing options with high monthly payments allow the lender to recover the principal quickly, further reducing risk. They also reduce the lender’s risk of inflation. As a result, motorcycle financing is made simpler for borrowers, mitigating the risk of excessive interest rates.
If the one financing a bike is in good financial condition, the rates will remain low. The rates on it, however, can rise significantly for a borrower with a less stable financial status. As a result, the interest rates for motorcycle financing will be higher if the borrower also has an active amount of debt.
When comparing the interest rates to motorcycle financing, the funding method is the main determining factor. The borrowers are more likely to use a conventional approach, i.e., considering the bank. Other than that, several different methods are also considered, like credit card options, insurance, and specific bike funding. In short, a borrower is more likely to receive a fixed rate if they stick with traditional sources of borrowing.
What Should Be The Credit Score To Finance A Motorcycle?
Undoubtedly, it is pretty advantageous to finance a motorcycle because you don’t have to worry about your savings at all. But at the same time, it is not that simple to finance a bike because there are numerous limitations and restrictions associated with it
The most important thing to financing a good motorcycle is your credit score. However there is no set limit, but if you have a decent score, finding good deals will be easier. In addition, the interest rate will be minimalized if you have a solid credit score.
The following factors primarily determine your credit score:
Percentage of revenue to debt.
The overall duration.
Conditions of financing.
What Is A Good Interest Rate For Financing A Motorcycle?
There are secured and unsecured types of motorcycle financing. A secured one may offer a reduced interest rate, but the lender can take the bike back if you don’t make payments. However, the unsecured ones vary from lender to lender and work differently for everyone.
In short, the interest rate will vary and would work differently based on your approach. However, to give you an estimate, these rates range from 4.50% to 5.00% for street motorcycles, and the lowest quoted rates are around 0.50 – 0.75 % for automated payments. On the other hand, interest rates for off-road motorcycles are higher, ranging from 8.50% to 9.25%.
Comparing rates and terms from various lenders before making a purchase or financing any bike is the best way to acquire the best motorcycle deal. Also, the best time duration for motorcycle financing should be between two to three years and never exceed 5 years.
Is Financing Motorcycle Worth It?
If you’re still unsure whether motorcycle financing is really worth the
hype, the answer is a YES!
Actually, owning a motorcycle is a luxury that many people may now enjoy, thanks to the option of financing. It has made our lives easier and enabled individuals to pursue their dreams of getting a fancy bike.
Financing has many benefits and allows people to get any bike they want at easy rates. So, what are you waiting for? Consider financing a motorcycle and obtaining the keys to a high-end model with Horsepower.