Winter may still be stable over our elongated country, but soon spring and summer will come. Among the spring signs, few are as clear as the sound of motorcycles. Most motorcycle enthusiasts are really longing for the first real spring day, and it doesn’t take many minutes for the bike to get a ride on the garage driveway.
Are you a motorcycle fan and have plans to buy a new motorcycle? Are you thinking of starting to drive a motorcycle with your very own bow? Whatever the case, there are a lot of things to think about about financing. In this article we focus on how you can lend to a new or used motorcycle.
Different ways to lend to MC purchases
If you do not have the cash to use to buy a new or used motorcycle, there is always the option to borrow. Basically, there are three ways to go, namely:
- Apply for a private loan
- Fund the purchase through a specific MC loan
- Take out more on an existing mortgage
All three roads are walkable in different ways. They have both advantages and disadvantages, and generally there is no alternative that is inferior to the others. It all depends on what your situation looks like.
Private loan for purchase of motorcycle
The idea of private loans is that the money should not be linked to any collateral. This means that a paid-out private loan can be used exactly how the borrower wants, for example to buy a motorbike.
Applying for a private loan is a very simple thing and today you can apply directly to your mobile in a process that takes no more than a few minutes. The question of how much you can borrow has a simple answer. It all depends on how your finances look. The better the finances, the more you can borrow.
The lack of a real collateral normally makes the private loan a slightly more expensive deal compared to the interest rate compared to loans with collateral. Therefore, it may be an idea to take a closer look at customized MC loans. However, as you can read more about below, this is not absolute truth.
Note: Private loans (and extended mortgages) are the only options if you buy a used motorcycle from a private individual. However, if you buy a used motorcycle from a car dealer, there is the possibility to apply for a motorcycle loan for the financing.
An MC loan is a loan for which the motorcycle itself constitutes collateral. In principle, the type of loan works in the same way as car loans and boat loans. MC loans are taken out either directly from a dealer, such as the car dealer, or at a bank or a credit market company.
To be able to take out a loan with the motorcycle itself as collateral, a cash contribution is required from your side. It is always at least 20% of the purchase price. You therefore borrow 80% of the purchase price.
Example: You want to buy a new motorcycle with a price tag of $ 130,000. The cash contribution you have to put will then be $ 26,000.
The cash contribution can consist of both cash and exchange vehicles, or a combination of the two. Just note that a car or motorcycle dealer has no obligation to make exchanges.
The idea of paying cash can be perceived as cumbersome and burdensome. At the same time, the model means that you have a chance to get a better interest rate compared to unsecured loans. The fact that the lender has a security in the vehicle itself means less risk and this in turn means a lower price for the loan.
However, that the lender has security in the motorcycle also means that your new MC is not actually “yours” to 100%. For example, if you want to sell it, you may first have to settle the loan in its entirety.
Cheap MC loans – so you can find them
If you decide to take out a loan to finance your new motorcycle, you obviously want to get as low interest rates as possible.
The lowest possible interest rate is obtained by extending a mortgage. However, there are some practical obstacles to this (see below).
What is best if we look at the alternatives to take a custom motorcycle loan or take a private loan. Generally speaking, you get a lower interest rate if the motorcycle is collateral for the loan. However, there is usually only one lender to choose, namely the one with which the car or motorcycle dealer has an agreement.
If you apply for a regular private loan with no collateral, you may be able to get a lower interest rate, provided you have a good financial position. It’s just that you carefully compare private loans and not just choose the first best name.
One easy way to find out what interest rate you can get for a private loan of $ 100,000, for example, is to use a loan broker. Through this, you get a large number of loan offers with only one application (and only one credit report). Good to know is that there is no compulsion to choose an offer.
Extend the mortgage
Last but not least, there is the option to extend the mortgage. In practical terms, it is possible to contact your mortgage company / bank and request to extend the loan by, for example, $ 100,000. It is quite possible (and quite common) to do so, but there is a prerequisite to keep track of.
There simply must be a so-called loan space. This means that there is a margin between the current mortgage loan and maximum loan to market value.
Example: You own a villa with a market value of $ 2 million. The maximum loan is 85%, ie 1.7 million. Your current mortgage is 1.4 million, which gives a margin of $ 300,000. Note that here you have a margin “on the paper”. The mortgage company may very well limit the loan opportunities a lot.
It is also good to remember that an extended mortgage is the same as a new mortgage in the sense of the law. Therefore, you may be struck by various rules regarding mandatory repayment requirements if you extend the mortgage.