It’s a reality that not everyone may be qualified for a standard motorcycle loan. Motorcycle first-timers and enthusiasts often explore other options such as layaway plans. Is a layaway better than a loan? How do they compare and differ from each other?
Basics of Motorcycle Loan
If you are not a cash buyer, most likely you’d finance your motorcycle. Here, you apply for a loan from a lender or dealer to purchase the motorbike of your dreams.
In borrowing the funds, you’d be charged with an interest rate that will be reflected on your monthly payment. You can look into the loan’s annual percentage rate which combines the interest rate and the fees on the loan.
The APR is based on your credit score, loan amount, loan term, make and model of the bike and other factors. You must go through a vetting process conducted by the lender to see if you are qualified for a motorcycle loan, including your capacity to repay it.
One Option That Is Layaway
Just what if you have a derogatory record like a delinquency or bankruptcy five years ago? This blemish on your credit report will affect your credit reputation and could cast doubt on your qualification as a borrower.
Because there are no guarantees in financing, either you get approved or declined, some dealerships offer layaway plans for motorcycles.
Layaway is typically used by retailers to ramp up sales especially after the Great Recession. A layaway plan pretty much works like this: you purchase an item and make monthly installment payments for a certain period of time, e.g. six months. When that period is over and you’ve finished paying, you will get the item.
In the case of motorcycles,each dealer has its own terms and conditions governing its motorcycle layaway plans.
For example, one dealership offers a layaway plan with zero interest rate. But you will be charged for the storage of the bike pending full payment and this storage fee is calculated based on the number of months the item is in the warehouse. Another dealer has layaway plans for used motorcycles.
- If you can qualify for a loan and like to repay the debt in a longer period, e.g. 3 years to keep the monthly payments loan, a motorcycle loan is your best bet. As soon as the loan closes and the sale agreement is consummated, you can readily use the bike while paying back the debt.
- If you’ve been declined of standard motorcycle financing but can afford a sizeable down payment and make payments for the next six months, you can do so with a layaway plan. You need to wait for a couple of months to fully use the vehicle, which will be completely yours as you’ve paid fully for it.
- It’s safe to say that there are more lenders offering conventional motorbike loans than layaway plans as the latter are more niche.