If you’re dreaming of a long winding road with a lush green tree canopy, a summer breeze with the slight smell of rain in the air on a Sunday afternoon, you might be in the market for a motorcycle.
Even if you don’t have the cash to plunk down in full via a motorcycle loan, that dream can become a reality. A motorcycle loan has generous lending terms, just like auto loans. Your loan can also finance additional expenses for essentials like a helmet, boots, and other protective gear.
If you’re researching motorcycle loans (what they are, how they work, and more), you’ve come to the right place.
What is a motorcycle loan?
Motorcycle loans are instalment loans used to purchase a new or used bike. Motorcycle loans are often secured loans, meaning you use the bike as collateral to “secure” the loan. Some lenders can also use an unsecured personal loan to purchase the bike and associated equipment.
How do motorcycle loans work?
Lenders sometimes classify motorcycle loans as specialty loans. This is broken down into more detailed categories on the lenders’ website, with new versus used bike options. The interest rates vary from those of auto loans.
These loans work similarly to auto loans in that you need to consider a few factors:
- Your creditworthiness — Lenders carefully review the health of your credit score and your income. These factors weigh even more heavily with unsecured loans.
- APR — The annual percentage rate, or APR, considers the total cost of the loan, including your interest rate and any fees you have to pay. A lower interest rate generally means your loan will cost less overall.
- Determine how much you can afford — Using a loan calculator will help ensure your monthly budget to afford a motorcycle loan payment. Take into account the down payment (if any) you plan to have upfront.
You’ll apply like any other loan, typically with documentation like W-2s and pay stubs to verify the information.
How long can the loan be?
Lenders usually offer one to seven years to pay back a secured loan. Personal or unsecured loans generally are in the one to five-year range. The time frames are expressed in months 24, 36, 48, etc., and interest rates vary accordingly.
Understanding the relationship between the length of the loan, interest rate, and your payback amount is crucial. A longer loan period will provide you with lower monthly payments. However, the tradeoff means you will pay more interest over the life of the loan. This makes the total amount you pay over the life of the loan higher.
A shorter loan period will increase your monthly payment, which lowers the amount of interest you pay over the life of the loan. The trade off here is a higher payment for a lower overall cost.
The bottom line.
Finding your dream bike and the financing to make it a reality is possible. Repayment timelines from one to seven years allow you the opportunity to get the right payment and interest rate terms for your situation.
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