If I weren’t doing what I’m doing today… I’d be traveling around the world on the back of a motorcycle. (Donna Karan, Fashion Designer and founder of DKNY Clothing)
As someone once observed, there are two kinds of people in the world – those who ride motorcycles, and those who wish they could.
I’m not sure that’s entirely true, but neither is it completely without merit. For those of you who love their hog, chopper, cheese-burner, bike, beast, bagger, or bar-hopper, there’s simply nothing like hitting the open road with your machine.
A motorcycle can be practical, of course. They’re generally more affordable than automobiles, and they use way less gas. As long as you’re not trying to bring home too many groceries or pick up a half-dozen kids from their activities, there’s a certain appeal to just strapping on that helmet and getting where you need to go.
Still, the practical stuff is almost secondary, isn’t it? That’s not why we ride – at least not mostly. It’s possible there are a few out there who choose their vehicle primarily to get from one point to another, but…
That’s weird, right?
Most motorcycle enthusiasts insist that there’s something about the ride itself that makes it unlike any other form of transportation. The closest comparison is probably the relationship cowboys used to have with a good horse. It’s a tool – it’s there to work for you, essentially – and yet, it’s almost a companion. An object of affection. Some would say a work of art.
That may be going a bit far, in my humble opinion, but then… it’s not my horse. Er… motorcycle.
Driving a motorcycle is like flying. All your senses are alive. When I ride through Beverly Hills in the early morning, and all the sprinklers have turned off, the scents that wash over me are just heavenly. (Hugh Laurie, Actor)
The procedures and considerations for a motorcycle loan are in many ways similar to any other sort of vehicle finance. Be aware, however, that not all auto lenders do motorcycle loans, and dealer financing at a motorcycle dealer may be handled a little differently than at your local car lot.
Like auto dealers, name brand dealerships may sometimes offer amazing rates or zero-interest deals in order to move inventory or spark interest. If you’re looking at a motorcycle loan, see what the dealer can do.
Other times, however, dealerships use financing to cushion the low-profit margins of the internet age. It’s great that we’ve reduced all the haggling and secrecy and suffering of your father’s vehicle-buying experience, but dealers still have to make a few bucks to keep the doors open and all those colorful balloon-men inflated. That can mean pushing add-on packages you may not need or partnering with outside financial institutions to milk a little extra out of the small print.
They may want you to be happy with the bike, but that doesn’t mean they’re automatically your best source for a motorcycle loan. At the very least, do some loan shopping BEFORE you get serious about selecting a motorcycle, or even a dealer. Know your options so you can discern whether or not what they’re offering works best for YOU.
There’s nothing wrong with checking out your local options for a motorcycle loan. Credit unions usually offer better terms than banks, but you must be a member to qualify. How difficult this is varies with the credit union. Some are very particular, and unless you work in a specific industry or meet their exact requirements, you’re out of luck.
Others will pretty much take any excuse to let you join. My local credit union targets educators, but if you’ve ever worked in a public or private school in any context, have kids in school, or have ever been to school yourself, you qualify. That means there are maybe a dozen people in the entire U.S. who couldn’t open a savings account with them. The only way to really know is to ask.
You’ve probably already figured out that we’re partial to this option around here. Online options generally mean convenient logistics, competitive rates, and flexible lenders, for a motorcycle loan or anything else.
Many online lenders are happy to work with you if you have limited credit or less-than-perfect credit history. They’ll still look at your credit score, and if you’re applying for a motorcycle loan, they’ll pay particular attention to your track record with vehicle payments. A lower credit score means higher interest rates and sometimes additional upfront costs because you’re technically a higher risk for the loan.
But just because your credit rating matters, for better or worse, wherever you apply, that doesn’t mean all loans are the same or that all lenders will handle it the same way. Online lenders are nimble by design, and some specialize in higher risk loans and developing long-term relationships with customers who need to build their credit history just as much as they need to take home that two-wheeler. They’ll look at your job history, your debt-to-income ratio, and whatever else might make you an acceptable credit risk. In short, they’re looking for ways to say YES.
I’d tell you that this is where Loanry comes in, but I suspect you know this by now. Yes, we’re very good at connecting people with reputable lenders. No, we don’t charge you for any of it. We help you connect; you decide whether or not to move forward with whatever offers are made thereafter. Of course, we hope you end up with a great online motorcycle loan – but that’s mostly just because we like you.
You do not need a therapist if you own a motorcycle, any kind of motorcycle! (Dan Aykroyd, Actor and Comedian)
Generally, you want to finance your purchase with a loan specifically designed for whatever you’re buying. There are, however, other sorts of credit which could conceivably be used in place of a traditional motorcycle loan.
If you have a high enough credit limit or choose an affordable enough bike, you could simply charge your purchase on a credit card. It’s certainly convenient since you don’t have to qualify for anything new – you already have the card and an approved limit. This also avoids adding another bill to keep track of. Your required monthly payments will go up as you increase your balance, but it’s not a separate obligation you’ve added on – just more of something you’re already paying.
On the other hand, unless you have a particularly good interest rate on your current credit card, you’ll end up paying more in interest this way. Credit cards are also difficult to pay down if you make the minimum required monthly payment, while a traditional loan has a set term and the same payment required each month.
A line of credit, sometimes called “revolving credit,” is in some ways similar to a credit card. You’re approved for a maximum amount, but only take out what you need as you need it. This means you’re only paying interest on money you’ve actually used.
A line of credit is generally more practical for ongoing expenses, such as those associated with a small business, but there’s nothing that says it can’t be used in place of a motorcycle loan. It is difficult to imagine the circumstances in which this is your best plan, however.
The pros and cons of personal loans which are this, well… personal depend entirely on the individuals involved. You may get great terms from Uncle Gustav and the flexibility to skip a month here and there if he knows you’re in a rough patch. On the other hand, it might mean some very uncomfortable holiday dinners or unnecessary family drama.
Money and relationships don’t usually mix well. That doesn’t mean they never work out– but be honest with yourself. I want you to get that bike, but in the end, people are more important, right?
We’ve already talked about the importance of your credit rating and credit history. Those aren’t the only factors in what sort of motorcycle loan you can reasonably expect. Here are a few of the most common…
This one’s a bit obvious, but there’s more to it than you might immediately recognize. The difference between a $5,000 motorcycle and an $8,000 motorcycle isn’t $3,000 – it’s $3,000 plus the additional interest on the loan. If the higher price means you stretch the terms out for 6, 12, or 18 months longer than you would have otherwise, the total cost over the life of the loan will be even higher.
I’m not saying don’t get the machine you want; just realize that when you finance, it’s about more than the purchase price.
Motorcycles, in general, aren’t as expensive as cars or trucks, but it’s easy to spend $10,000 or more on a decent bike. Let’s use round numbers and assume you buy one for exactly that amount. You’ve been saving up, and manage to pay $1,000 down, leaving $9,000 to finance.
You work out a motorcycle loan at 4.5% interest to be paid back over 36 months, making your payments around $267. Assuming you stick to the schedule, by the time the bike is paid off you’ll have paid $638 in interest. Fair enough.
Let’s finance that same amount at 4.9%. It doesn’t sound that much higher, does it? We’ll also assume you’ve decided not to use your savings as a down payment (I’m sure you’re doing something responsible with it and not blowing it on scratch-off tickets and overpriced coffee). If you stick with 36 months, interest over the life of the loan will cost you about $773. Your monthly payments will now be $299. This may not sound like a dramatic difference until you think about what $30/month can actually do.
Just one more. Hoping to keep your payments down, you stretch that same loan of $10,000 at 4.9 over 48 months instead of 36. It works, sort of – now your monthly payments are around $229. Over the life of the loan, however, you’ll end up paying over $1,023 in interest – a substantial difference for such a short time frame.
Buying a used motorcycle can mean big savings on your motorcycle loan. Prices are typically much lower than new machines, so you’re financing less and hopefully setting up a shorter term for paying it off. Used motorcycles depreciate more slowly than new, so you’re less likely to find yourself “upside down” on your loan.
On the other hand, used motorcycle loans, like used auto loans, tend to carry a higher interest rate than when you buy new, making your monthly payments a bit higher and meaning you pay more in the long run for the money you borrow.
I really love to ride my motorcycle. When I just want to get away and be by myself and clear my head, that’s what I do. (Kyle Chandler, Actor)
Whether you’re applying at a local bank or credit union or exploring online options, there are a few things you can do to maximize your time and effort and make the process as painless and efficient as possible for yourself. It’s all about information and preparation.
Just because you can get approved for a certain motorcycle loan amount doesn’t mean you should spend your maximum. Hopefully, you already have a household budget to assist in making these sorts of decisions; if not, it’s time to put one together.
Obviously you want to purchase a bike you’ll be happy with. Keep in mind, however, that whatever loan arrangements you make won’t go away just because you’re roaring down the road feeling awesome. Let’s remember the less exciting but no less significant feeling that comes from being able to successfully cover your monthly expenses when you get home.
“Keep my motor running – head out on the highway. Looking for my checkbook and whatever I should pay… Like a true, mature adult, I was born, born to be pragmatic. Don’t want my debt so high that I can never afford to die… Born to be… solvent…” (No? I’ll try again.)
“Here I go again on my loan… paying down the only bike I’ve ever owed…” (Still not doing it for you? Maybe just one more.)
“All I wanted was to be free, and that’s the way it turned out to be. Flow credit, flow, let your waters wash down – keep me on this road to pay everything off in a timely and responsible manner…”
Clearly I’m in no danger of becoming the Weird Al of financial wisdom. Perhaps we should move on…
You don’t want to find out there’s an issue with your credit history or a problem with your credit score while you’re in the middle of applying for a motorcycle loan. It’s easy to check your credit ahead of time for free, so there’s really no excuse.
If you discover an error on your credit report, it may take a few days (or longer) to resolve it. Don’t wait until the last minute to do this part. In fact, it might not hurt to save your place and check your scores now.
Don’t worry, I’ll wait.
You may have a pretty good idea of what sort of motorcycle you want to get. That doesn’t mean you shouldn’t explore your options, however. Knowing what else is out there – features, costs, etc. – arms you with information. Besides, you never know when you’ll fall in love with something you didn’t even know existed.
The same is true of your motorcycle loan as well. Comparison shopping is essential to getting the best deal available to you. It’s not just about interest rates – it’s about terms, other charges or fees, and making sure you’re comfortable with your lender (you’re going to be dealing with them for a while). Arm yourself with information. Keep an ongoing list of questions you want to ask and important details you wish to compare.
A motorcycle is a long-term commitment; so is a motorcycle loan.
In the end, no one else can tell you what to buy or the best way to finance it. Every situation is different and you know yourself better than anyone else. But go in as informed as you can and as prepared as possible. I’m not trying to take the fun out of buying that bike; I’m trying to make sure it’s still fun a few months later when the “new” has worn off but your obligations remain.
See you on the road!
Blaine Koehn is a former small business manager, long-time educator, and seasoned consultant. He’s worked in both the public and private sectors while riding the ups-and-downs of self-employment and independent contracting for nearly two decades. His self-published resources have been utilized by thousands of educators as he’s shared his experiences and ideas in workshops across the Midwest. Blaine writes about money management and decision-making for those new to the world of finance or anyone simply sorting through their fiscal options in complicated times.