What is a motorcycle loan?
Motorcycle loans are financing provided by the lender to finance the purchase of a new or used motorcycle with specific repayment terms (fixed or variable interest rate plus fees paid to the lender) and leverage in the event of a repayment schedule breach.
Motorcycle loans bridge the gap between the amount of money available and the purchase price of the motorcycle. When purchasing with the help of financing from a lender, it is important to understand:
the intended use of the bike and the characteristics of the different models;
your financial capabilities for the down payment and repayment of the loan;
your creditworthiness, which determines the terms of the loan, including the interest rate you can expect from the lender;
the term of the loan;
repayment schedule (weekly, bi-weekly, monthly, etc.);
condition of the motorcycle you wish to purchase (new or used);
loan with or without loan collateral;
level of risk in the cost of the loan (fixed or variable interest rate).
As you can see, at the beginning of our sample checklist for a motorcycle loan, we have included the purpose of the motorcycle. Indeed, this is important because it means a different purchase price and different riding skills and experience. Below is a short list of motorcycle types and their features that buyers consider.
An adventure motorcycle is a mix of style, power, the ability to take long rides, a large fuel tank, and space for things needed on the road. This type of motorcycle is popular because it can hold the road well in practically any condition and has ABS and wind protection. Adventure motorcycle tires are also strong enough for off-road use. A new adventure motorcycle costs $10,000 and can go over $20,000.
Dual-sport motorcycles allow you to enjoy the features of a cruiser, a dirt bike, a street bike, and a road adventure; they have crush protection and high ground clearance. Depending on the brand, you can even find models under $10,000. It allows sharp turns on the road. It is an everyday motorcycle that can take you on adventures. Different engine sizes depend on customer preference.
Note: a small tank of such a motorcycle is a disadvantage for a long-distance drive.Roadsters or naked motorcycles allow you to feel the wind and road and be maneuverable. Some say that such motorcycles are just two wheels with an attached engine and almost nothing else, including electronic amenities. They are very simple but light and functional, and easy to maintain. New models of this type can cost somewhere between $ 7,000 and more.
Sport motorcycles are intended for high speed, quick braking, and adventures of sports challenges. They have wind protection and allow them to make various turns and challenges of the sport. The price depends on performance features and the brand. Style and design reduce aerodynamic drag. However, riding such motorcycles requires more experience to get the most out of it. The sitting position of the rider gives good speed during the turns but reduces the comfort and strain of muscles and can cause cramps.
A cruiser motorcycle means comfort even for long distances, and it has a bigger gas tank, good luggage capacity, and wind protection. The driver position while riding is much more comfortable than the sport one and causes no straining of muscles. Passengers also can sit comfortably. Even beginners can choose such a model and enjoy the road. The cost of such motorcycles varies from $5,000 and over $20,000.
Three-wheeled motorcycles are more stable on the road, convenient for long-distance rides, and allow extra luggage room, which is an outstanding feature for long trips, and they have an interesting design. Besides, such models may be a good idea if a driver does not have a lot of experience with riding a motorcycle. The cost varies from $9,000 to $50,000 and up.
Before applying for motorcycle loans or pre-approval, decide on a model and explore several loan options. Of course, that does not mean you have to apply immediately, but with an online motorcycle loan calculator, you can get a real picture of your prospects for servicing the loan. Even if a lender can approve a higher loan amount, you should consider this offer wisely because it is the market. Still, you are the one who agrees to cut part of your budget for the repayment of the loan as payment for the pleasure of riding a newly acquired motorcycle.
Evaluate different scenarios of your motorcycle financing loan amount, down payment, and repayment term. Then, compare the cost of various motorcycle financing options like online and personal loans, motorcycle loan rates, and car loan options. Make sure you calculated the registration fees and checked the lender's insurance policy.
Major types of motorcycle loans
When buying a motorcycle, you can choose from several financing options, such as one of those listed below:
dealership financing (directly from the dealership or the dealership cross-sells loan products from partner lenders (lenders);
motorcycle loan from the bank;
a loan from a credit union for a motorcycle purchase;
motorcycle hire purchase (leasing);
manufacturer purchase.
loan products from online lenders (usually with higher interest rates, but all credit scores are accepted);
personal loans (can be offered by various lenders, typically do not require collateral, and have no restrictions on how the borrowed money can be used).
In terms of the loan term, it can be a long, medium, or short loan.
Regarding the type of interest rate, it can be fixed or variable.
According to the collateral requirements:
secured or unsecured loans that do not require collateral.
there can be a trade-in option for a purchase of a new or used motorcycle.
Depending on the loan type, chosen lender, credit score, and motorcycle condition (brand new bike or a used one), payment options such as monthly payments are also different. At the same time, independent of payment options, one must remember local government fees and other fees, the possibility to enjoy flexible terms.
How to apply for a motorcycle loan?
You can apply for this loan online or offline or at a lender's branch, including the option to apply via online communication.
Bank motorcycle financing allows you to finance your motorcycle upon lender and bank approval.
Credit unions allow basically the same as banks, except that the requirements are not as strict, and the borrower is free to choose within the terms of the loan agreement.
Manufacturer financing allows the motorcycle to be paid for in equal installments, and like dealers, bikes can be financed through a lease agreement directly or through an intermediary.
Dealers either offer their loan financing or work with another lender that gives them cash back for providing customer credit.
There are loans from private individuals with notarization of the amount borrowed.
You can also apply online for a personal loan and use the borrowed funds to purchase a bike. Such loans can be approved within one business day. To find the best offer, review personal loan rates from different lenders. Usually, online lenders who offer financing to purchase a bike, grant credit approval within several business days.
Requirements
The requirements for motorcycle loans are relatively standard and strongly reminiscent of car loans.
The borrower should:
be of legal age;
have Canadian citizenship or be a permanent resident of Canada;
be able to enter into legally binding contracts;
have a monthly income of $1,800 on average;
provide proof of income;
have money for a down payment;
have excellent/good credit score (or any credit score for online lenders);
provide an appraisal for the used motorcycle.
Ways to get a motorcycle loan
You can apply for the Harley Davidson of your dream online or offline using web banking or an installed app. Money is transferred to the borrower directly or to the seller. A motorcycle loan should be bearable, but it must cover the motorcycle's cost less the down payment.
Pros and cons
Pros
the main advantages are that you can enjoy riding your motorcycle even before you have saved a sufficient amount for the purchase;
within months or years, you can plan your expenses and quickly repay the loan;
if the borrower has a perfect credit score, there is a variety of offers at the lowest interest rates among loan offers;
if the lender requires additional insurance, it also means less risk for the borrower in case something happens to the motorcycle, or there are unexpected problems with the source of income;
loans teach financial discipline because of the risk of lowering one's credit score.
Cons
Both new and used motorcycle financing, financing with special terms and being the best deal, have multiple risks:
if a borrower violates the repayment schedule, they risk worsening their credit score in the future;
new and used motorcycles have different costs;
title loans mean the risk of losing collateralized motorcycle if the payments are not made timely and thoroughly;
hire purchase loans will not lead to being the owner unless the borrower would pay the final installment covering the price of the loan;
if the borrower does not have a Canadian credit history, the only alternative might be online lending options with higher interest rates.
The motorcycle loan, regardless of its duration, implies a financial obligation with strict consequences for violating the terms of the contract on the borrower's part. It has several advantages (flexible repayment, competitive market interest rate, etc.) The disadvantages are connected with loan options and financed items (it concerns new and used motorcycles, additional fees, and collateral registration). New motorcycles tend to be more expensive, and floating interest rates may not be the best deal.
How to repay a motorcycle loan debt?
The repayment terms of the motorcycle loan are usually specified in the loan agreement. There can be different options:
direct debit;
online bank transfer;
cash payment at the counter of your lender;
payment through a bank branch;
payment via a mobile app to which your bank account is linked;
cheque;
repayment via mobile app or web banking from the borrower's account to the lender's bank account.
Most lenders provide online loan calculators on their websites for you to determine your ideal monthly payment. In order to receive this value, you should key in in the calculator some pieces of basic information on the loan terms: the loan term, the APR, and sometimes other factors (for example, the down payment of the trade-in amount).
Legal regulation
In general, credits in Canada are regulated at the federal and provincial levels. For example, under the Criminal Code of Canada, Article 347 (1), the maximum interest rate on a loan may not exceed 60 percent. However, motorcycle loans (if the loan is a title loan where the motorcycle is used as collateral for the loan to secure repayment to the borrower) are regulated at the local level. In any case, motorcycle loans are disbursed at competitive interest rates below 60% on average.
Title motorcycle loans are regulated at the provincial level, although in some provinces, retained title lenders must have a license to be registered and offer loans. At the local level, the Office of Consumer Affairs is responsible for helping customers protect their rights when using loan products.
The total cost of a motorcycle loan in Canada
The actual cost of a motorcycle loan depends on the borrower's creditworthiness, the loan's term, the type of interest rate (fixed or variable), the loan amount, and the lender (including the choice of loan product).
In addition to interest charges, the borrower may also incur the following costs on a motorcycle loan:
insurance;
loan origination fee;
loan modification fees (if required);
appraisal of the trade-in or used motorcycle;
collateral fees;
late installment fees (NSF fee, etc.)
All costs associated with the loan contribute to the cost of the loan to the borrower. Under the law, the borrower must be clearly informed of how much the loan would cost, what fees they would be required to pay, on what terms, and in what amounts. This includes penalty fees if the repayment schedule is violated.