What Are The Benefits of Motorcycle Loans?

Motorcycle loans are typically very flexible and may be offered through a number of different sources. Banks, lenders and manufacturers will all have options to provide the financing necessary to obtain a motorcycle. If you are smart with your spending and know you can afford the additional recreational vehicle, a motorcycle loan will provide many benefits to your financial status.

Flexible Financing Options

Motorcycle loans tend to be much more flexible than car loans. You will likely have the option of pursuing a secured or unsecured loan. A secured loan will use an asset, typically the motorcycle itself, as collateral. The loan will be riskier to you but also cheaper. An unsecured loan will have no collateral. This will make the interest rates higher, but you will not have to risk the asset. Further, motorcycle loans may be installment loans or revolving lines. Installment loans are given in a lump sum paid off with monthly payments. Revolving loans are unique with motorcycle purchases because many manufacturers issue credit cards for the purchase of the bike. This will allow you to determine how much to pay each month on your loan and provide a lot of flexibility.

Diversify Debt Load

Borrowers should carry a few different forms of debt on their credit report in order to appear well-diversified. You should have a mix of installment and revolving credit as well as a mix of large and small loans. Because you can easily choose the type of loan you want for your motorcycle, you will be able to elect a type of loan that will fill a need in your credit report. If you do not have an unsecured installment loan, for example, you can elect this option to add a new type of loan to your report. 

Fast Maturation Process

Motorcycle loans are usually much smaller than car or home loans. Because the limits are lower, the loans mature much faster. It is not uncommon to pay off a motorcycle loan in less than three years. Short loans are useful because they involve less risk of changing interest rates for the borrower. They are also less risky for the lender because they do not have large risks of inflation making the loans less profitable. Additionally, you will own the motorcycle outright much earlier, meaning you can trade it in or sell it sooner without owing a huge amount back to the lender after the sale. This is particularly important in a time when fuel technology is changing rapidly and making different vehicles outdated very quickly.

Build Credit

Anytime you pay off a loan, you build your credit. Motorcycle loans are great for this because they are paid off so quickly. If you are looking for a good way to boost your credit a few years before seeking a mortgage, a motorcycle loan may be a good solution. Instead of buying the bike outright, consider financing the purchase at a low interest rate. You will likely make up for the amount you spent on financing for the vehicle with the amount you will save on a better home loan rate.

 


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