The benefits of owning a bike are many. In addition to enjoying open-air rides, you can reach your destination quicker than you would in a car. Motorcycles are also perfect for short distances, allowing you to run errands efficiently.
However, it’s no surprise that bikes are pricier and may cost you upwards of $300,000, excluding the gear and accessories. At times like these, dipping in your personal funds can leave you exposed in case of emergencies.
Alternatives such as motorcycle finance help you purchase your dream bike with easy monthly payments for a fixed period. But how can you find out if you’re eligible for a loan?
Here are some factors that impact your chances of securing a bike loan.
Credit Score
Usually, all kinds of personal loans demand a high credit score. A respectable credit score has its benefits since it grants you a low-interest rate and discounts on additional fees. Motorcycle financers generally look for a credit score of around 700.
Each financer might use a different model to assess your credit score. They might also check factors like loan repayment history and debt.
If you possess a low credit score, here are a few tips to help increase it.
- Pay your bills on time, including EMIs and credit card instalments
- Check your credit report for potential factors impacting your score and weed out discrepancies, if any
- Lower your credit utilization ratio
Debt-to-Income Ratio
The ratio of monthly debt payments to gross monthly income constitutes the debt-to-income ratio. It is an effective way for financial institutions to check your eligibility and assess the risk before granting you a loan.
For example, you earn $6,000 every month. Out of this, you spend a total of $2000 on various payments like loans and mortgages. The estimated debt-to-income ratio in such cases is 33%. Although most institutions provide loans at a lower interest rate for individuals with a 20% to 25% ratio, the limit differs.
Loan Duration
While the interest rate remains stagnant irrespective of the loan duration, the amount increases substantially. For example, shorter-period loans attract higher amounts as monthly payments, while longer-period loans settle for a reduced amount.
Down Payment
You are often required to provide a fixed amount upfront for the purchase of the bike. Since loan providers often finance around 80% to 90% of the total amount, the down payment can decide the loan amount and the interest rate.
However, motorcycle finance companies are increasingly offering the option for minimum or zero down payment to ensure a hassle-free process for the customers.
With on-road vehicle interest rates rising by 17.7% in August 2022, it is vital to contact institutions that can assist you at every step of the process and offer unmatched deals.
Final Thoughts
As the appeal of bikes promises to increase with new models dotting the market, personal loans are proving to be lucrative options among the masses. Along with easing the overreliance on existing funds, they offer you the flexibility to tailor your finances according to the cost of the bike.
So, if you are struck by the thought of having your own bike to enjoy frequent rides, look no further than a motorcycle loan! Get your dream ride today! Avail of the financial assistance and use it to your benefit.
