If you're looking for motorcycle or dirt bike finance, there are a number of important things to consider first before signing on the dotted line. It pays to look around at the different finance options available as there are many. And they're not always as black and white as they first may appear. If you don't take the time to read, understand and question the small print you may find that you end up paying much more interest than you initially expected - taking the shine off that brand new dirt bike.
If you have never applied for a loan (or dirt bike finance) before, this is basically how it works. Lenders will or will not loan you money depending on your credit history and your ability to meet the loan repayments. Your credit rating is based upon whether you still owe people/creditors money from previous dealings and how well you have met your repayments to other debts in the past. The better your credit rating and the more money you earn - the more likely you will qualify for a loan with a low interest rate. The worse your credit rating and the less money you earn - the less likely you will qualify for a loan, and if you do qualify you will be paying higher interest rates because you are considered a security risk. Talk about kick ya while you're down!
Finance Companies & Banks (Personal Loans)
Secured Loans - This is where an asset of yours (e.g your new dirt bike) is used as collateral for the loan. Here in New Zealand you can pick these loans up for around 14.95% interest.
Unsecured Loans - These pose more risk to lending institutions therefore usually incur a higher interest rate. In N.Z you're looking at around 17.95% interest. If you have a mortgage you may be able to take out a reduced interest rate loan with the same lender.
Using a low interest credit card can be a great way to wrap your legs around the bike of your dreams much earlier than otherwise possible. Interest rates can be as low as 12.5% if you qualify. Just make sure you are aware of any account fees so you don't get any nasty surprises down the track.
Motorcycle Dealership & OEM Financing (Original Equipment Manufacturer)
These days most motorcycle dealerships and companies like Honda, Yamaha, Suzuki Kawasaki etc offer finance packages for their brand new dirt bikes through a thing called private label credit cards. Interest rates vary but are usually higher (than personal loans) over the life of the loan. Keep an ear out for ridiculously low interest deals and sometimes interest free bargains. Dealerships sometimes offer this to move old or slow moving stock.
If considering one of these loans check the fine print! Read it, study it and don't be afraid to ask questions. If you are not careful the interest rate can increase dramatically once the promotion period has expired.
If you cannot secure any dirt bike finance due to bad credit, concentrate on using companies that specialise in bad credit lending. If that fails too, you need to work on improving your credit rating. This doesn't necessarily mean you have to pay off all of your debt first. It may just be a case of making consistent repayments on your existing debt. If you get rejected by a couple of finance companies, keep asking around but be prepared to pay a higher interest rate if accepted.
Communicate with the lenders who reject you and ask them why you were declined. You may be able to rightly justify why you got into a bit of trouble in the past with payments but can now prove to them that it won't happen again (ex. you may have been made reduntant but now have a secure job). Check what previous creditors have filed against you - they have been known to make mistakes that can greatly effect credit scores which can make the difference between your finance being approved or declined.
These can offer you peace of mind if anything should happen to your ability to pay off the loan. If you lose your job or become too ill to work it can cover some or all of your payments depending on the agreement. Of course this will cost you extra on top of your repayments so you need to weigh up whether it is worth it for you.
To finish... arming yourself with the above information on the various types of dirt bike finance, and taking the time to figure out which one best suits you can potentially save you a lot of money. Or it may just help you find someone who will approve your finance when nobody else will, meaning you don't have to be bikeless for the next 6 - 12 months.
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