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Informative Articles

A Guide To Motor Scooters
What type of motor scooter would serve you best? Motor scooters have evolved into a popular and cheap form of travel all over the world. Motor scooters are vehicles with small wheels and a low-powered gasoline engine geared to the rear wheel. The...

Add style to your car by adding a new Rim and Tire!
Wheels and tires are obviously important, but in terms of how your car looks, they're probably the more boring parts of your car. You can change all of that by adding a rim and tire package to your car. The most popular options for cars is...

Choosing a Motorcycle
You are about to embark on a one of the most rewarding experiences life has to offer. Life is a journey! You may as well be riding a Harley Davidson! Choosing a motorcycle should be an enjoyable and unforgettable experience. However for the...

She’s Hot in the Road…
Every bystander that saw you wishes that they could also have a girl like yours and they exclaimed “She’s definitely hot on the road…” and then you smile and said “Wish on brothers…this girl is mine…” Have you ever wondered why most men refer...

Two and Four Stroke Engines: Fast and Simple Answers.
A few fast responses and facts about Two and Four Stroke Engines. Many years ago when I got hooked by motorcycles, I started to hear a lot about two and four stroke engines... It seemed there were (and there still are) strong opinions in pro...

 
Welcome To The World Of "Upside Down" Motorcycle Loans!

With the depreciation on motorcycles being so enormous after they are driven off the showroom floor, the potential for a buyer owing more on their motorcycle loan than the bike is worth it quite high. Owing more on your bike than it is worth is often referred to as the world of “up side Down#8221;.

Many people finding themselves in this situation discover that financial lessons are sometimes the hardest and most expensive to learn. Motorcycle loans of more than 48 months (especially without a down payment) put you in the position of owing more than the value of the bike.

Let’s take a look at this phenomenon.

First, the interest calculation your lender uses can make a big difference in your situation, especially in the first 18 months. There are two primary interest calculations, pre-computed (combined with rule of 78) and simple interest.

Pre-computed interest combined with Rule of 78, is typically the worst situation for a buyer because most of the interest is paid in the first 24 months. Therefore, in the first 24 months little of the monthly payment has gone towards paying down principal. If a buyer wishes to sell or trade in the motorcycle within this timeframe they will likely find themselves owing more than the bike is worth. Statistics show that the average owner trades in every 18-24 months.

Simple interest on the other hand, is much more favorable for buyers since interest accrues on the balance of the loan. However, buyers that extend their loans for greater than 48 months can still find themselves up side down with simple interest. This is especially true if a down payment is not made. The reason this occurs is that the


motorcycle depreciates faster than the principal is paid; leaving the balance owed to the lender to be more than the bike can be sold for.

A common view that many people have is that they will just surrender their motorcycle to the lender if they are caught in an “up side Down#8221; position. If you are considering this option don’t! Your worries do not just end after your bike is surrendered or repossessed; in fact they are just beginning. The lender will sell your bike at an auction for much less than it is worth. You will still owe the difference between the amount you owed on your loan and the amount the motorcycle sold for at auction. So if you owe $5000 and the bike sells for $1500, you still are responsible for owing the lender $3500. To make it worse lenders may tack on hefty auction fees which you will owe as well. So the net result is that you are now responsible for making monthly payments on a bike you can no longer ride.

So what steps can you take to prevent from being caught “up side Down#8221;?

1. Find a lender that uses simple interest. Avoid lenders that use pre-computed / Rule of 78 interest calculations.

2. Always try to put money down on your purchase.

3. Try to avoid motorcycle loans that extend past 36 months.

About The Author

Jay Fran is a successful author and publisher for a website that specializes in Motorcycle Loans: Poor Credit Approvals Available. A comprehensive resource on simple interest motorcycle financing, poor credit, new, used and bad credit motorcycle loans.

http://www.motorcycle-financing-guide.com/

 

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