A bad credit motorcycle loan is seldom, if ever, a good idea. With gas prices soaring, many people may be looking to this type of transportation alternative to save money. The appeal of a motorcycle that gets great gas mileage is certainly understandable. But that doesn’t mean it’s a prudent financial decision for someone with a poor credit history. However, if a person absolutely must purchase a motorcycle and is not able to pay cash for it, there are certain things to take into consideration that may help with the entire financing process. These include obtaining a credit report, understanding the variables involved in calculating a monthly payment, and recognizing the unscrupulous practices of some sales people and financial institutions. With some basic financial knowledge and careful research, a bad credit motorcycle loan may not be such a bad idea after all.
The financial lives of American consumers seem to revolve around the mysterious workings of three major institutions. These three credit bureaus, namely Equifax, Experian, and TransUnion, gather all kinds of information about the finances of American citizens and mix it with employment and residential data. Using complex secret formulas that are guarded as closely as the ingredients for the world’s best-selling soft drink, each bureau assigns a numerical value to every single individual in their files. This numerical value is called a credit score. Originally designed to evaluate a person’s financial history, including the likelihood that future loans would be repaid, the score is now often used by prospective employers and even insurance companies. A person with a low score may be passed over by an employer for someone else. An insurance company may deny auto insurance to someone with a low score. Obviously, a low score will affect whether a prospective motorcyclist will get a good or a bad credit motorcycle loan.
The bureaus used to make it difficult for consumers to know their scores, but a few years ago, federal legislation was passed that changed all that. Every person is entitled, on an annual basis, to one free report from each bureau. Many financial experts and consumer advocates suggest that individuals make a note on the calendar to remind themselves to request one report every four months and to make this habit part of their routine financial management. This way, an individual can examine a different bureau’s report on a regular basis and take steps to correct any inaccuracies that may be contained in the document. A small fee may need to be paid to receive the bureau’s score, but this number is usually only needed if the individual is planning a major purchase. Anyone considering the purchase of a vehicle or motorcycle will want to get this number before shopping for financing. This important information may help a buyer turn a bad credit motorcycle loan into one with better terms.
Any type of financing is based on three important variables. These include the amount of the loan, the interest rate, and the length of the loan. A poor score may affect each of these variables. For example, a bad credit motorcycle loan may be offered to someone who wants to borrow more money than is prudent given the household income. The interest rate, which is also known as the annual percentage rate (APR), will almost always be higher for someone with a poor credit history than for someone who has a proven track record of paying obligations in a timely manner. The length of the loan may be for a shorter duration, say two to three years, instead of the five- or six-year loan that will be offered to buyers with higher scores. Even if the loan is for a small amount, the higher APR and shorter term will cause the monthly payments to be more than the same loan with a lower APR and longer term. A bad credit motorcycle loan will almost always have a high APR and short term.
Buying a motorcycle, or any other big-ticket item, may become an emotional experience. The prospective buyer needs to be careful that he doesn’t become so involved with the desire to own a motorcycle that his judgment is affected. This is a good time to remember the wise words of King Solomon: “O ye simple, understand wisdom: and, ye fools, be ye of an understanding heart” (Proverbs 8:5). There are many websites that give wise advice to prospective motorcyclists and that expose the unscrupulous practices of some lenders. A person can gain wisdom and understanding by paying attention to this advice before applying for financing. Some of these websites include information on unnecessary fees and add-ons that the lender may try to include in the final contract. Applying for a loan may prove to be an excellent time for knowing one’s credit score. A lender will not be able to foist a bad credit motorcycle loan on someone who knows that his score qualifies him for a lower APR or a longer term.
The internet has made it easy to apply for financing online. But before starting the application process, the prudent person needs to consider the cost — not just of the item being purchased, but also the legitimate fees and the interest that will be included in the final total. This number can be reduced by paying attention to wise advice and gaining understanding of certain financial principles. The first step is getting a copy of one’s credit report and making sure it is accurate. Second, a prospective buyer needs to clearly understand the variables that go into determining the monthly payment. And third, the shopper needs to be willing to walk away from unscrupulous lenders. By taking these steps, that bad credit motorcycle loan may turn out not to be so bad after all.