This is a question we are often asked and there's a simple answer and there is a more extensive discussion around the considerations you should take into account.
The simple answer is YES. On most loans, especially personal bike loans, you can make extra payments. But wait…let’s talk about what costs may be involved, the impact early payments may have on your loan over the loan term and what alternative actions you may consider.
Cost Benefit Analysis
There are both costs and benefits associated with making extra payments on your bike loan. We can present the facts as they exist in theory, but it will be your personal decision as to whether it is the right course of action for your specific financial situation. If you feel you could benefit from expert financial advice we always recommend people consult with their financial advisor who will have a broader view of your individual situation.
- Making extra payments, in addition to the scheduled monthly repayments is allowed for most loans, specifically we’ll focus on Secured Bike Loan and Unsecured Personal Loans. Both these loan types permit extra payments.
- In regard to the practical side of actually making the payments – most monthly loan repayments are set up as direct debits from your bank account. In order to make additional payments, you would be advised to contact your lender and be given the banking details to make your additional payments and the correct code/reference number to use on such deposits. This would ensure that your extra payments are correctly deducted from your loan account.
- By making extra payments you will pay off your loan earlier, that is, before the agreed upon loan term has expired. Depending on your loan type, paying out a loan early attracts break fees. These fees are charged by the lender when a loan is finalised early.
- Unsecured Personal Loans usually have no break fees as they are established on a variable interest rate. So if you make additional payments and subsequently pay off your loan early, you should benefit from paying less interest. That is, you won’t be paying interest on the months/years that your loan has been shortened by through the extra payments and no break fees will be incurred. So it is a win for you scenario.
- Secured Bike Loans do attract break fees, though usually minimal. We cannot provide specific amounts as the fee may vary from lender to lender and will depend at what point in the loan term you finalise the loan. But a fee will be charged.
- To find out exactly what the break fees will be at what point in your loan term, you can phone your lender and they will provide a ‘payout figure’.
- Once you know what the fees or penalties for early payout will be, you can weigh up whether the interest you’ve saved balances the fees incurred. If your bike loan was established based on the current low interest rates, you may discover that there is very little financial benefit to paying out the loan early.
- On the other hand – if you have additional funds, that is the money you intend to make the extra payments with, how would you use those funds for other purposes? This is the type of issue that your financial advisor will discuss with you.
Loan Structure Considerations
The thought process around making extra payments on your bike loan can and possibly should, be started when you first arrange your loan with Jade Bike Loans. As a finance broker, your consultant has the experience to structure your loan to suit your individual requirements.
When you apply for a loan, most of the discussion centres on your current financial situation. You could also take into consideration your anticipated future prospects. If you feel your income or financial capabilities will increase at some stage of your loan, perhaps you may consider opting for a higher monthly repayment. Early pain for long term gain.
You pay more per month but pay less total interest, your loan term is shorter and if you complete the full loan term, no break fees will apply.
One of the many great benefits of using a finance broker such as Jade to arrange your loan is this flexibility and our proactive approach, to structuring loans to specifically suit our individual customers.
When you approach the bank or a finance company yourself, you are often told, not asked, what the repayment amounts and loan terms will be, according to their guidelines.
With Jade, we work differently. We put our customer at the centre of the conversation and work in their best interests to achieve the best bike loan possible.
We hope this has given you the information to answer your question and helpful information to assist with your bike loan. For more info, tips and hints around bike loans, please browse our website and articles.
If you’re ready to move on arranging a motorbike loan, contact us at 1300 000 003 and discuss a cheap motorbike loan with one of our consultants.
