Applying for financing on a new bike...

[Ian522]

Ive been saving for a new bike in the spring. To be specific, a dual purpose bike in the $3-5k range. Im planning on paying about $1k for a down payment, apply for financing, hopefully get approved, and paying off the rest of the bike off over the next few years.

But the thing is, to my knowledge I have no credit history whatsoever. Im 23 and I have never had a credit card or loan in my name. I figure that paying off the bike will be a good way for me to build some credit history. I suppose having no credit is better than having poor credit, but will I have a problem getting approved for financing when I go to buy a bike? Id be willing to live with a somewhat lousy interest rate(within reason), but im just wondering if I can get approved at all.

Anyone else been in a similar situation?

[qwerty]

Anyone else been in a similar situation?

Yup, about 10,000 years ago. I was 18 at the time, though. I was told not to bother because new bikes and new borrowers are a bad mix for banks. I had to buy insurance to pay off the loan in case I died. I also had enough in savings to cover the note.

[Lion_Lady]

You'll have a tough time getting a loan for a motorcycle.

They're consider "luxury" items by most banks and the interest rate is gonna be high. You'll HAVE to carry full coverage and gap insurance is a good idea too. All that adds up quickly to more than a person can afford monthly.

Why not use that $1000 and find something used? You can turn around and sell most any learner friendly bike for what you paid for it, in 6 months or a year. It will be way cheaper to insure too.

P

[qwerty]

Lion-Lady, have you been following me around?

Instant gratification:
Wait 6 weeks for dealer to order.
2007 TW200
$3999+$199 set-up+6.25% sales tax+$299 shipping+$45 title app+$32 registration+$12.50 inspection -$2075 down=$2773.86 financed over 24 months@7.25%=$124.51/month+$52/month insurance=$176.51/month.

Delayed gratification:
Watch ebay and craigslist for 6 weeks.
2003 TW200, 706 miles
$1800 cash+6.25% sales tax+$45 title app+$32 registration+$12.50 inspection+$76 insurance=$2075 not financed=$176.51/month in my pocket.

Park the bikes side-by-side and you can't tell which is which. Somehow, paying $176.51/month for a warranty seems a little ridiculous. Com'on, it's a TW200, it don't need no stinkin' warranty.

If you want to build your credit, rent an apartment in your name, rent-to-own a couch or something, get utilities in your name, get a cell phone in your name, make all the payments on time, every time, no excuses, and never bounce a check, while depositing increasing amounts each month in savings of some sort, perhaps a 401k. Keep the canceled checks sorted by payee. Take 2 years worth of records and THEN ask for a loan.

[paul246]

The more you can save for a down payment, the easier it will be to get the loan. If you can get a reliable co-signer, even better.

[Ninja Geoff]

Check a dealer that has multiple bike brands. Kawasaki is REALLY easy to get a credit line with (19 yrs old, $8k!!!) and here's the kicker, they DON'T require insurance coverage. Some dealers let you finance a bike with another brands financing company. Like the yama dealer i went to when i lived in maine let someone finance an R1 with polaris so he wouldnt need full coverage (saving him from $14,000/yr full covereage).

I wish all brands were as easy as kawasaki. I might be rocking an 04 599 instead of the 650R if honda was as easy (like we need ANOTHER 04 599 on the board )

[Jthmeffy]

yah, i financed my bike through suzuki and they dont require full coverage either

[matthew5656]

yah, i financed my bike through suzuki and they dont require full coverage either

No full coverage sounds nice, but it sounds too risky. With only liability insurance, once/if you crash the bike and total it, you still owe another 23 months of payment but have no insurance coverage to cover the loss. Full coverage is expensive yes, but if I were to finance any bike, i'd most definitely pay for it because "ya never know".

Also Ian522, an absense of credit actually looks worse than poor credit to many lenders. If you failed to make payment, you would be at little risk because you have no credit on the line, but the lender would be risking everything. Poor credit isn't great either, but "no credit" is just as bad.

Paying rent does not improve credit. A cell phone bill won't help either. Those kind of liabilities will only worsen your credit if you're late on payment. What will probably help the most if you apply for a credit card through your bank with a $500 maximum balance (or whatever amount you are most comfortable with). Once you receive the credit card, use it once a month on something minor, like a $20-50 purchase. Then at the end of the month, pay the total amount due OR the minimum payment due, but then interest will be accrued if you only make a minimum payment. Just don't make late payments.

[Jthmeffy]

the best option is to pay for it flat out.. i only financed my bike for credit purposes (until i found out how much of a "dog" insurance is gonna be.. now im putting the bike in my dad's name so im gonna pay it off)... a credit card helps out a lot.. I have a credit score of 710 (about a year ago but have had no problems since) and im just trying to add to it cause being 20 doesnt help out much when u go to get loans

[Candy750]

How's that coming along Ian??

When you apply and receive credit through Honda, Suzuki, Polaris "financing" the trick is that it's a credit card - it's not a "loan" and that is why they do not require full insurance coverage.

Read your documents carefully - any intro's on rate, payment, etc. likely end.

Credit card interest is calculated different from loan interest - you pay more interest on a credit card at 9.5% in comparison to a loan at the same - credit cards accrue interest daily, then when you don't pay the whole balance and interest outstanding becasue you are making a monthly minimum payment, interest is calculated on the principal amount plus the interest - again.

Conversely, loans are "simple interest" - the interest accrues daily on the outstanding balance - your payment is "split" between the interest owed for the month, plus a portion (e.g. 1/60th) of the principal. But, you will pay less interest on a loan.

Also - minimum payments on a credit card seem low at 2-4% of the balance - but you aren't eating up the principal, and not covering that interest nut...

Interest only for a into period - there's another pitfall. If you don't pay the whole balance by the end of the promo, they will charge you interest back to day one - and it will hurt! Again, you will have interest accruing on your unpaid interest!

Check out your local credit union. I work for a credit union, and they are interested is helping people obtain credit...

One more note - no one can tell you who to use as a co-signor. They can only counteroffer your declination with a different loan and a co signor. A word of caution to co signors - it will appear on your credit report, and for all intents and purposes become yours if the primary fails to pay...and if the primary is late, it ay be reported on your bureau....

We can't require anyone purchase GAP on anything. We can suggest it. GAP will cover the difference between the book value when its "totaled" and the outstanding balance of the loan. If you borrower more than the "thing" is worth - with sales tax, warranty, etc. it's a good idea. If you borrower less than the book value of the "thing" you won't need it.
We don't sell our members things they don't need. But DO consider getting disability insurance on your loan (aka CLAD). I think it added less than adollar to my payment, but if I go on disability, my payments will be made for me.

(banker by day...biker by nights)