Loans and finance are extremely useful and widely used tools to provide instant access to the goods we want to acquire when we don’t have the cash. With interest rates at current low levels and a plethora of lenders providing cost-effective consumer finance, purchasing a new machine with a motorbike loan is a very popular way to go.
But by taking on finance, the borrower is actually prolonging the time period until they own the bike outright. For some buyers, that’s just fine. They are happy to stretch out the commitments and pay out the loan over whatever time fame they can secure.
Others have reasons for wanting to finalise their loan as quickly as possible so they have full ownership of the motorcycle without encumbrances.
The reasons for owning a bike sooner can be varied, individual and personal but typically include:-
- Looking to take on other loans for other purposes, possibly to add to your motorcycle collection. It can be beneficial when applying for new loans to have minimal other loan commitments as this is assessed by lenders when forming their offer. Check your credit score and fix and errors.
- A personal goal to clear debt quickly in order to pursue new financial goals.
- Looking to resell, trade and upgrade in a relatively short timeframe and want the bike paid off in sync with those plans. Selling or trading in while ‘under finance’ may attract break fees.
- Realising the asset value of the motorcycle to improve a personal balance sheet.
- Expecting or to cover off on any future changes to financial circumstances.
Whatever the reasons, there are a number of ways that borrowers can tweak their motorbike loan in order to own the motorcycle outright sooner than the end of the loan term. Actions to own the bike sooner can be made at various stages of the loan process including prior to application, while setting up the initial loan and during the loan term.
Pre-Application Considerations
If paying off the bike loan is a priority, there are a number of actions or considerations that applicants can address prior to making a formal loan application.
Selection of loan type, either secured or unsecured may be one. While our Secured Bike Loan is definitely the most popular type of loan for new bikes, break fees do apply when a loan is paid out early. So if the decision is made mid-term to pay out the loan, these fees would need to be paid.
Unsecured Personal Loans are an alternative and if established with a variable rather than a fixed interest rate, no break fees usually apply if the loan is paid out early. However, due to their nature, unsecured loans attract a higher interest rate and as such the overall cost of the loan will be higher than with say a fixed interest rate secured loan.
Having a good credit profile is key to getting the best interest rate which can lead to paying off the loan earlier. Addressing any problems or errors in a credit report prior to making a loan application may contribute to being offered a cheaper interest rate or better loan deal. This can result in lower repayments and hence paying off the loan faster than if a higher interest rate is applied.
Deciding between buying a new or a second-hand bike may also play a part. New goods may attract cheaper interest rates than used. As the interest rate determines the overall cost of the loan this may mean a used bike loan may take longer to repay. Weighing up the costs and benefits in regard to bike loans of new v used prior to purchase may be worth considering.
Initial Loan Set Up and Structure
If paying off the bike quickly is the priority, then opting for a shorter loan term may achieve that goal. Our consultants negotiate with the lenders for the loan term that best suits our individual customers.
The loan term in conjunction with the interest rate and total loan amount determines the monthly repayment amount. The longer the loan term the lower the repayments. The shorter the loan term the higher the repayments. To own the bike sooner, opt for higher repayments over a shorter loan term. Refer to our Bike Loan Calculator to see how this works.
Reducing the total loan amount is an obvious way to enable a loan to be repaid faster. Motorcycle buyers can achieve this in a number of ways which include: selecting a lower priced bike or by paying a deposit to the seller to reduce the amount required to be borrowed.
Mid-Term Loan Adjustments
Paying attention to personal financial objectives when setting up a motorcycle loan makes good sense because making changes to a loan during the loan term can be more complicated but there are work arounds.
If mid-term the borrower decides they want to make major changes to the repayments and loan term may actually require refinancing. This means replacing the existing loan with a new loan structure and that would involve fees and charges. Refinancing attracts fees of establishing a new loan and break fees for finalising the loan early.
An easier way to make minor tweaks is to make additional payments over and above the fixed monthly repayments. Perhaps you’ve received your tax return and decide to put that towards your bike loan in extra payments. Possibly received a pay rise and that could go to a little extra on your bike loan each month.
Making extra payments is permitted for both secured and unsecured motorbike loans but there are considerations to be addressed. By making extra payments the loan will be paid off sooner than the fixed loan term which has been set. Paying out a loan early can attract break fees which would need to be paid. To find out more about break fees, refer to our article in our resources library or speak with one of our consultants.
Our objectives include assisting our customers to achieve their personal financial goals. If that means owning your motorbike outright sooner, then speak with one of our Jade Bike Loans consultants to discuss the best option for you. When speaking with our consultants at the outset, have a clear vision of your objectives so the loan can be structured to meet your needs.
For a quote on a motorcycle loan, contact Jade Bike Loans at 1300 000 003
DISCLAIMER: IN REGARD TO ANY ERRORS OR MISREPRESENTATIONS IN THIS MATERIAL, NO LIABILITY IS ACCEPTED. THE DETAILS, CONTENT AND DATA ARE PRESENTED PURELY FOR GENERAL INFORMATIONAL PURPOSES FOR MOTORBIKE BUYERS AND THOSE SEEKING MOTORCYCLE LOANS. THIS IS NOT INTENDED AS THE SOLE SOURCE OF INFORMATION FOR FINANCIAL DECISIONS. IF SPECIFIC ADVICE IS REQUIRED AROUND FINANCIAL DECISIONS, READERS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.
