Advice on taking out a loan

[Wind_Danzer]

Hey all,

I'm new to this so bear with me. I would like to take a loan out to buy a new (well used ~ a 97) motorcycle and was wondering how to go about it. I plan to visit the one bank I have an account with today and also visit a Credit Union close to my home.

Right now I could get financing through the dealer but it's at 11% right now and I would like to have that a little lower.

I have a few questions:

1. If I was to stick with the dealer, would a co-signer bring the rate down?

2. Should I try for a personal loan or actually go with the motorcycle loan?

3. I have a decent hunk of change to put down for the bike. Should I though get a loan for the full bike and then use that hunk of change to jump start paying the loan off (the bike is $3,700+)

3a. Should I also include the cost of insurance with it (it's $572/year)?

4. Is there anything I need to watch out for and be aware of?

5. Do most places allow you to pre-pay w/o penality? I'd like to not have anythign to pay off for a long time, I'm just about done with the Jeep payments.

6. Will being about 10 - 12k in debt hurt my chances?

Hmmmm.... I can't think of anything else right now. The reason I want the bike is to allow me to pay more towards debt by using the bike (Yes I'll use it in the winter when the ground isn't snow or ice covered) allwoing me to throw more money on the bills. My last bike has blown the engine and has just turned into a money pit. Fawking bike...

[Joe Dillard]

Originally posted by Wind_Danzer
1. If I was to stick with the dealer, would a co-signer bring the rate down?

Possibly. A "scoring system" is typically used to determine the APR. However, some dealerships attempt to make extra $ from the customer by jacking up the APR rate. They "buy" an APR rate at one percentage, then sell it to the customer at another percentage. This way, they make more $$ from not only the sales profits, but also off the loan.

Originally posted by Wind_Danzer
2. Should I try for a personal loan or actually go with the motorcycle loan?

Using the motorcycle as collateral will usually help with lowering the rate of the loan. Unless the finacial institution is offering low personel loan rates, the use of the cycle should allow for a reduced APR.

Originally posted by Wind_Danzer
3. I have a decent hunk of change to put down for the bike. Should I though get a loan for the full bike and then use that hunk of change to jump start paying the loan off (the bike is $3,700+)

Putting a substantial down payment down at the beginning of the loan will reduce the "risk" of the loan & help lower the APR. As you've probably already figured out, APR's are tied into kind of a "risk factor".

Originally posted by Wind_Danzer
3a. Should I also include the cost of insurance with it (it's $572/year)?

It depends on which type of insurance you're talking about. There's credit/life & disability insurance which often is attached to the loan. This type of insurance offsets loan payments if injury, death, or loss of employment occurs.

Normal property, collision etc insurance I'd steer shy from having this attached to the loan. This way, you're not paying absorbant premiums due to high APR because it's rolled into the loan.

Originally posted by Wind_Danzer
4. Is there anything I need to watch out for and be aware of?

Everything! Dealerships make $ from your lack of knowledge. They often attempt to sell extended warrantee's at jacked-up costs along with every other trick in the book.

Originally posted by Wind_Danzer
5. Do most places allow you to pre-pay w/o penality? I'd like to not have anythign to pay off for a long time, I'm just about done with the Jeep payments.

Yes, this will need to be spelled out within the "fine print" of the written agreement/contract.

Originally posted by Wind_Danzer
6. Will being about 10 - 12k in debt hurt my chances?

Possibly. Like I mentioned earlier, your APR goes off a scoring process. Part of this it tied to your debt to income ratio, and also your credit scores.

I would certainly check at various loan institutions for the "bbest rate", like you mentioned. HTH

[Jeff Weston]

11% isn't entirely out of whack, unfortunately. Motorcyles carry higher interest rates than automobiles. This was explained to me that motorcycles have greater chances of being totalled by even moderate accidents and that consumers will generally pay their house, then their car and lastly their motorcycle/RV payment last when things get tight. For instance, my credit union offers new autos at 100% financing for 4.74%. The best used motorcycle rate is 9.99% at 90% financing. These assume good credit ratings.

If you plan on paying your bike off in a short time, you may want to consider a credit card. Just about all of mine have 4-5% deals going for 6 months to a year. If it's not paid off you can transfer the balance.

As a side note, even with the cost of gas, are you sure you'll save money when you figure in the cost of insurance and bike payments as well as the increased risk of riding in the winter? Do you have a disibility policy?

Good luck!

[TJRON]

Check with your credit union.
Check with your insurance agent.
You will probably save money. Talk cash only with the dealer.

Or do the opposite. Talk a total deal with the dealer buying everything they have to offer and work on lower monthly payment. As they are screwing you on all the extras they may lower the actual purchase price. After making the deal refinance it at your credit union, see your insurance agent and then drop there insurance and cancel all the other junk.
I've seen this work!

[Wind_Danzer]

Joe,

I was talking about motorcycle insurance from www.njrider.com and it's a full year policy, they don't have 6 month terms for the 800cc bikes.

Originally posted by Jeff Weston
As a side note, even with the cost of gas, are you sure you'll save money when you figure in the cost of insurance and bike payments as well as the increased risk of riding in the winter?

Bike would be paid off right for the dealer with a loan through a bank/Credit Union, if I don't do the dealer.

The only increased risk over what we are risking already by riding a bike would be wet/snowy/icy roads... to which I wouldn't be riding. Maybe add in a pair of warmer weather gear and I wouldn't be too worried about it.

Someone mentioned to me about getting a personal loan for all the debt I owe (as I'm paying 16%/card right now) and the bike. Do you think this to be wise? I would like to be able to get a loan at 6%-9% and it would still be better in the long run then trying to dent these debts as they are.

Thoughts....

[TJRON]

Originally posted by Wind_Danzer

The only increased risk over what we are risking already by riding a bike would be wet/snowy/icy roads...

Jamie, a dent in the body is a bit morerisk than a dent in the fender.........
A dent in the body can put you out of work. No work no payments.

[TObject]

Here are the current average 48-month used auto loan rates depending on your Fair Isaac score (FICO ? your credit score):

720 to 850 - 5.749%
690 to 719 - 6.492%
660 to 689 - 8.805%
625 to 659 - 11.511%
590 to 624 - 16.493%
500 to 589 - 15.823%

Talk to a financial adviser about your entire situation.

[Jeff Weston]

Sergey,

Auto loans carry better rates than motorcyle loans, though the credit score is still applicable.

[TObject]

Is that because people on motorcycles are more likely to default on the loans?

[Jeff Weston]

Originally posted by TObject
Is that because people on motorcycles are more likely to default on the loans?

That's what the guy at the Harley dealership told me years ago when I looked into a bike. Full collision insurance is also more expensive than cars (as a function of purchase price) because they are so easily totaled by laying down the bike. Whether any of it is really true, I don't know.

[Wind_Danzer]

Ok, went loan hunting today. I've decided to add all my debt into the loan too.

Went to my bank:

12% on $15,600 would be $520.60/month over 3 years.

Went to my (well mine now, signed up for it) credit union:

They will not cover the whole $15,600 (will only cover $10,000 on a personal loan). This sucks. We talked and manuvered the numbers and found that if I took a personal loan out for the cost of the bike $4,000+, the APR will be only 9.5% instead of 11.99% (anything over $5k at the union, the APR goes up) or 11% from the dealer. This will cost me 140/month over 3 years

Conclusions:

I may look to do the bike loan from the credit union for 9.5% and take out the debt loan for 12% from the bank. Doing it this way should even knock about 20 or 30 buck off the total if going strictly at the bank.

I plan to get the loan, go to the dealership with money in hand, maybe $3,200 - $3,500 (they are asking $3,799) and seeing if that will convince them to let the bike go. It's on consignment though so I'm not sure if it will fly. If not, the base price is right at blue book so I don't have a lot of leway anyhow. Then take the money that has come into my hands from other places (not the loans themselves) and throw all of it right onto the bike loan, including any money not spend that I got if the dealer will take the money in hand approach.

In July my Jeep will be paid off so that $251.60/month I've been paying could now be used for either loan. I could add it to the bike first ($391.49/month ~ +/- a few bucks) or onto the seperate debt loan ($611.93/month ~ +/- a few bucks). Of course I could split it between the two, I'm still not sure.

So does this sound like a plan?

[Wind_Danzer]

Well that was quite interesting... I just spoke/argued/fought with my mother, someone who I'm honestly not fond of do to reason I will not get into here (though some many know). Wefought about a few things, he assumptions of me currently based on the reason for my current high debt. I went nuts in 1999/2000 but have been behaiving for years now, trying to get it down. Of course she singles out the bike I have now that is toast too as "stupid spending".

Well she has said that she will not cover the bike what so ever but for my debt, she would cash a CD they have for $12k and give that to me to use. I'd have to then pay $500 a month to pay it back but as a christmas gift, she wouldn't charge interest... ever. I would also have to pay the $3k she says I owe them (I requested an itemizied list) at $500 a month too. At that rate, I could have everything paid off in 2 years and 5 months. She has to clear it with dad but this would be better then using the bank and have an extra interest charge.

The bike I woudl still have to do on my own though.

Of course, I could get the debt cleared sooner as once the Jeep is paid off, I could throw more money to the 500 bucks. I figured it would take about 17 months to pay it off doing that.

So how does that sound?

[TJRON]

You're probably not going to like this but:

The sooner you get away from borrowing from your parents the sooner you will truly be an adult and believe me, free from them having their thumb on the top of your head.
My older brother gave me this advise and it was the best thing I ever did.
I could then tell my lecturing dad it was non of his business.
Parents should take a clue from bears and run the cubs up a tree when they're old enough to fend for themselves and make their own mistakes.
If you can't afford it, you don't need it.

[Wind_Danzer]

Ron,

I hear you. She approached me about this after I went to the bank for a loan.

I could be well and clear of the debt in 3 years (bank) or in 2.5 years or sooner (parents) depending on what I want to do about this family thing. Plus that no interest thing would be nice... though "if you play, you better be ready to pay," which I was just fine with today since I finalyl took the bulls by the horn to do something about it.

The bike she refuses to pay for, which is fine by me and she set that stipulation right away. I'd rather take a loan out for it then worry about them with it.

[Daless2]

Originally posted by TJRON
You're probably not going to like this but:

The sooner you get away from borrowing from your parents the sooner you will truly be an adult and believe me, free from them having their thumb on the top of your head.
My older brother gave me this advise and it was the best thing I ever did.
I could then tell my lecturing dad it was non of his business.
Parents should take a clue from bears and run the cubs up a tree when they're old enough to fend for themselves and make their own mistakes.
If you can't afford it, you don't need it.

Hi Jamie,

Please know, that like Ron's advice above this is being offered with the best of intentions.

Please please please Get yourself Out of Debt!

I know that isn't as much fun as having a motorcycle to ride, but it is indeed the must prudent thing ANYONE can do!!!!

Have you calculated how long it would take you to pay off your current debt IF you Didn't buy the bike? You might be surprised!

Make that your Mission, and accomplish your Mission as quickly as you can. Then buy the toys of your choice, on your own (Ron's advice) and live your own life your own way.

Get out of Debt Jamie, that is the smartest thing anyone can do.

Frank

[William]

I'm un qualified to make a comment in someways because I never really got into debt in my life. But I can tell you somethings that I know, and know very well.

Debt:

The only thing to owe on are cars and houses. We as a family use our credit card sparingly, and pay it off as fast as fast can be. We purchase slightly used cars, and pay those off fast. If we don't have it, we don't buy it. This has done us very well . At age 28, my wife and I scored collectively 797 credit wise. We bought a house.

In dealing with many folks who've worked for me, the few that have gotten out of debt simply quit spending, paid what they owed, and then spent.. better. What sucked for them (and I had to live with them through it, and felt thier pain by proxy), was getting used to not buying what ever they felt like... And then getting used to living simple. Anyone else who tried, but compounded it with extra purchases.. (that were probably singularly ok..) Never made it. Never. And sometimes it broke my heart. Good people have these problems.. it's not dirtbags, or idiots, or loosers... Good people who just don't see down the road..because other things kind of make it hard to see clearly. While it is thier fault, I don't fault them all that much. It's easy to solve, but hard to practise. Like quiting smoking I would say.

Swallow the bitter pill and get out of debt. It sucks, but long term, you'll be happier and free than you could ever feel on a motor cycle with the wind in your face.

Here's how to put it all in perspective. I've got enough credit available (on cards alone) to put dual 60's, pay a shop to install brakes to stop 37's, and an atals. But really, I can't affoard a warn axle conversion in real terms.

About family:

I've got sort of a goofed up family. But, freeing up all the acroutrements of debt, guilt, power control, blame, etc has made it such that I can relate normally to those whom are left. There is no bigger emotional burden than being held down by owing a family something.. and paying for it in blood, sweat and tears.

Frank and Ron said it all.. I'm just relating some supporting views on it. You should "grok it". Really!

Your "water brother"
William.

[Handlebars]

William summed it up really well, Jaime. I've followed a similar course in life as he has. If I can't pay cash for something, I can't afford it. I did use credit a lot in my youth, but even then I paid it off as quickly as I could. As I got older, I would make a point to save money up for whatever it was that really caught my eye, and you know what? Most of the time I would find that the interest in the object of my desire would wane long before I was finished saving money. My road trip last year came about because I had no debt and a bunch of money in the bank. That was the purest expression of financial freedom I could imagine.

I also think you are barking up the wrong tree with your motorcycle purchase this time of the year. You have to be very committed to riding in the winter to make it work. In reality, it would be quicker to drive the jeep to work because it takes so long to suit up for safe and comfortable winter riding. The only reason to buy a bike now is if you have the cash lying around and use it to drive a hard bargin with somebody that has lost interest with their bike. Going into even deeper debt now thinking that you will be saving money in the long run is a mistake. You don't HAVE to live debt free, in fact you will be with the majority of Americans if you live paycheck to paycheck with your debts outweighing your assets. Once you have enjoyed the freedom of debt free living, it is hard to rejoin the masses.

William also brought up something interesting: Go to you library and borrow "Stranger In a Strange Land". Read it while you mull this over (if you haven't aready), it really wakes you up to seeing traditional values from a different perspective.

[DanB98TJ]

Another vote for paying off your debt. Once you get into the habit of buying on credit it's hard to get out from under all those payments.

The only way I'd suggest buying a motorcycle is if you have enough cash to do so, and even then you should sit down and figure out how long it would take to break even with the lower operating costs of the bike - it might turn out that you would be better off just driving the Jeep daily. You already have a Jeep payment, and it sounds like some other bills as well, so I wouldn't suggest taking on any additional obligations.

Right now all I have is a house payment, utilities, insurance, etc. - the necessities of life. I financed my Jeep when I bought it but paid it off with the proceeds from selling my first house - no way I wanted that payment on top of the higher house payment. I do have one credit card, and I just finished charging the gears, lockers, and a few other items, but will pay it off within the next month.....I'm sure the credit card company hates me because I seldom pay them any interest. It's nice knowing that if times get tough, or my job isn't as secure as I thought, that I can survive without having to struggle to pay a bunch of bills.

[Phil Howell]

And, yet MORE advice to get out of debt . . .

In my younger years, I had great credit and used it to buy every impulse item, Jeeps, mortorcycles -- you name it. This went on for years, until I finally ran the debt load up too high when I added a house to evrything else. My Dad came to me and made me an offer just like the offer your Mom made you (although I was way, WAY further in debt than you are now). I took him up on the offer and was soon behind on my payments to him. It's easy to be a slow payer to parents, even when you have the best of intentions. Relations were very strained with my family when I couldn't pay my bills. Especially bad was that I was STILL buying things on credit, using cards that kept showing up in my mailbox! Things had to change. My wife and I decided to cut up all our cards (very hard to do) and buy nothing else until we could pay off our debt. This took eight years to do, but, with paying cash for everything and selling a home and making a profit, we were able to finally pay the debt off. All of it, even to my parents.

We now own everything outright. Our home, vehicles, everything have no encumbrances. We do use a couple of credit cards, but pay them off every month. This is a wonderful feeling! If you ever visit out here, you'll see that our home is pretty nice and friends always wonder how we can own something so nice on a magazine freelancer's income. It's because the only payments we have are for utilities, insurance, charities and food.

As I read over this, I cringe to think you might take this as some old jackal sticking his nose in your business. Please don't. As I read your posts, I could see me, way back when and would sure like to see you break out of the debt whirlpool before it sucks you under, like it did me.

No matter what you decide -- good luck!