Motorcycle Loans – Avoiding Common Mistakes
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Successfully locating and financing motorcycle loans can be a difficult process. Many times the thrill of buying a new Harley or other motorcycle can cloud our ability to make informed financial decisions. The following submission is an excellent article about the pitfalls of motorcycle financing and common mistakes when shopping for a loan.
Be sure to check out my recent experience of refinancing my Harley loan . |
| Avoiding Common Mistakes When Financing Your Motorcycle Loan
by Jay Fran Many motorcycle buyers tend to make similar mistakes when shopping for a motorcycle loan. Whether interest rates are high or low, there are some common things to watch out for when financing your new or used motorcycle. The following are the most common mistakes motorcycle buyers make when obtaining a motorcycle loan. Shopping for a motorcycle before shopping for a motorcycle loan.
Many motorcycle buyers enter the showroom looking for a motorcycle before they determine how much money a motorcycle lender is willing to loan to them for the purchase of a motorcycle. There is no need to shop for a $20,000 Harley Davidson motorcycle, if a lender is only willing to provide a loan amount of $10,000.
Additionally, once the motorcycle buyer enters the showroom, a slick salesperson can often pressure many buyers into motorcycle loans that are not in the buyers best interest. Loans with much higher interest rates than they could have obtained through their own bank, credit union or an established lender. Salespeople, whether for cars or motorcycles, strive to get their customers into loans through the dealership. This is due to the fact that dealerships receive commisions for selling loans. Therefore, salespeople frequently push impulse buying, which increases the urgency for the motorcycle buyer to get their financing on the spot.
The bottom-line is, it is always best to shop for a motorcycle loan (or auto loan) before entering the showroom. Even if you settle on a loan through the dealer, having an idea of what you qualify for can be a strong bargaining chip.
Diving into the unknown motorcycle loan.
Motorcycle buyers often jump into motorcycle loans that they do not completely understand, or may not be the best suited for them. For instance, some manufacturers often run credit card style loans or loan promotions on their private-label credit cards. One common program has been offered where a dealer partners with a credit company to issue their credit card to fund the purchase. Not to be confused with loans through credit card companies like Capital One, these promotions typically offer a low interest rate for a short term (12 or 24 months). After the loan period has expired, a much higher interest rate is put in place for future balances or purchases. These credit card style loans are good for the short term but can easily get out of control later on.
There are additional pitfalls to credit card promotional loans. Such loans tend to have a less favorable appearance on credit reports when viewed by future creditors. If the motorcycle buyer cannot afford to pay off the loan during the short promotion period, then they are typically better taking a slightly higher interest rate on an installment motorcycle loan for a longer term.
Borrowing too much money.
Another common mistake the first time motorcycle buyer makes, is not having a clear sense of how much motorcycle they can afford. This is especially true for young motorcycle buyers who look to buy the top sport bikes that cost up to $10,000 – $15,000. What they fail to realize is that financing a $10,000 – $15,000 motorcycle can stretch them to thin, resulting in them having little cash to enjoy themselves and the motorcycling lifestyle. They may also have too little cash to pay for insurance, maintenance, registration or new accessories for their motorcycle.
Not asking the right questions.
Motorcycle buyers should be completely aware of the type of motorcycle loan they are applying for. Asking the right questions can make the difference between a good loan and a terrible mistake.
Common questions to ask when shopping for a loan:
•Is the interest rate fixed or variable? If fixed how long will it be fixed for?
•Are there circumstances that can make the interest rate on the motorcycle loan change in the future?
•What happens if a payment is 30 days late? Does the interest rate increase?
•What happens if a payment is 60 days late? Does the interest rate increase?
•How long is the term on the motorcycle loan?
•If the loan is an installment loan, does it use rule of 78 or simple interest? (Simple interest is always better because it does not penalize the motorcycle buyer if the loan is paid off early.)
•What is the down payment requirement to get the motorcycle loan?
•Is full coverage insurance required?
•How much is registration and are these fees included in the motorcycle loan?
•Are there any administrative fees to get the motorcycle loan and if so how much are the fees?
Overall, motorcycle buyers can avoid these common mistakes by spending a little extra time focusing on shopping for a motorcycle loan and asking plenty of questions. Understanding the terms of your loan will permit you to concentrate on what’s important… getting out there and riding.
About the author: Jay Fran is a successful author and publisher at motorcycle-financing-guide.com A comprehensive resource on how to have the best experience and get the best deal on motorcycle financing, bad credit motorcycle loans, high risk motorcycle loans and motorcycle buying.
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