Like any other investment you’re going to make in your lifetime, the secret to success is all in the preparation. Do your homework, shop around, have a clear idea of what you want. Commit at least 75% of your time and efforts to preparation, and you will be rewarded with a loan that complements your specific financial needs.
Although it may seem obvious, it is worth mentioning: do not go shopping for your new motorcycle until you have shopped for the loan. How can you be a smart shopper if you don’t know how much money you have? Best to have an amount in mind before stepping into the showroom, where you know you’ll be star-struck by the gleam and luster of those beautiful bikes. Then there’s the sales pitch that is designed to add zeros to your spending allowance, and it’s easy to forget that the greater the loan, the longer you’ll be paying it back. Go shopping armed with a number. Salespeople want you to purchase your bike and your loan from them, so if you have done your research beforehand, you’ll know whether they are indeed offering you the best deal.
Which brings us to the loan itself – the research project. There are many options for financing your purchase, so if you look long and hard enough, you’ll find one that is built for you. Online loans are becoming increasingly popular, so knowing what you’re getting into becomes even more important. Understanding your obligations involves asking questions, especially if this is your first loan. Some items to check off the list for every loan offer you consider:
· Term on the loan
· The down payment needed to secure the loan
· What are the registration and administrative fees, and are they included in the loan?
· Is full-coverage insurance required on the loan?
· Interest rate: fixed or variable? If fixed, for how long?
· If a payment is late, does the interest rate change?
Make sure the agent you are getting your information from outlines all the circumstances that might affect the interest rate on your loan.
Things to keep an eye out for:
Some manufacturers offer credit card loans with an enticingly low interest rate. However, the low rate is for a short term (usually 12-24 months), and once that term is up, the interest rate skyrockets. If you need longer than a year or two to pay your loan off, you’ll pay less in the end by getting a longer-term loan with a slightly higher interest rate.
Also, avoid loans that use the “rule of 78,” which means that you will continue to pay interest even if you pay your loan off early. The better alternative is Simple Interest, which does not penalize you for paying the loan off before the end of the term.
Finally, don’t make the most common mistake of young (or first-time) motorcycle buyers, which is borrowing more than they can afford. Really, you want a motorcycle you can ride and enjoy, not a shiny piece of metal that sits in your garage that you’re afraid to ride because you can’t afford to maintain or insure it. Go for a loan that will get you a good bike that you can still accessorize and repair, and will leave you with a little cash for yourself.
Just to drive the point home: spontaneity is great when choosing ice-cream flavors, not when you are buying a loan. This groundwork will eliminate extra debt and hassle in the future, so you and yours truly can ride blissfully off into the sunset.