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".

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" 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"?

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.

Jay Fran is a author and publisher for a website that specializes in Motorcycle Loans: High Risk OK. A comprehensive resource on simple interest motorcycle financing, poor credit, new, used and bad credit motorcycle loans.

---

Ride Hard - Hydrate Harder

This summer is showing all of the signs of being... Read More

Fuel Cells Motorcycles, Trucks, Tanks, ATVs and Fire Hazards from Heat Exchanges

We have heard a whole lot of talk about fuel... Read More

Liquid Cooled Minimotos (PocketBikes), How Fast Are They and Are They Affordable?

As the latest craze of Minimoto Madness continues in the... Read More

Motorcycle Tires - Why Should You Care?

One of the most important parts of any vehicle is... Read More

Do You Need a Part for Your Harley Davidson Motorcycle?

Need a Harley Davidson Part for your ride?Where do you... Read More

Necessity of Motorcycle Parts

If you are one of the many people who consider... Read More

How To Make Your Own Vintage Motor Cycle & Automotive Spare Parts

Vintage Car & Motorcycle restoration enthusiasts all share one thing... Read More

It?s One Thing for People to Buy Your Product or Service, but It?s Another for Them to Tattoo Your

William Harley and Arthur Davidson, both in their early twenties,... Read More

Mini Moto Mayhem

Mini Motos have been around in the UK for around... Read More

Motorcycle Suspension Setup: Getting to Grips with a Black Art

Suspension Set-up: The basicsWhether you are a road rider or... Read More

A Convenient Way to Slash Your Gas Bill

"With oil prices spiraling higher almost every day, people are... Read More

How to Remove Your Mk2 Mini Moto Engine

Many mini moto modifications will require you to remove the... Read More

Kids Like to Ride Motorcycles Too

Roaring up on a motorcycle has a strong draw for... Read More

So You Want To Be A Custom Bike Builder? Start With A Motorcycle Kit!

So you want to be a custom bike builder? Well... Read More

Kawasaki Motorcycles - Independent in Thoughts and Actions

The story of Kawasaki Company goes back to 1924, at... Read More

The Motorcycle Helmet You Want May Not Be As Safe As You Think!

Choosing the right Motorcycle helmet can make a difference?.?.literally between... Read More

Motorcycle Suspension: - A Troubleshooting Guide

Trouble Shooting Suspension Problems.Adjustment locations: ForksRebound adjustment (if applicable) is... Read More

Honda Super Cub and 50cc Honda Cub - The Volkswagen Beetle of Motorcycles!

A very clever design: the Honda Super Cub was the... Read More

Motorcycle Accidents: Preparing Your Case

Motorcycle accident is an unexpected occurrence that results to shock... Read More

Motorcycle Helmets - Mind Your Head!

To most riders, motorcycle helmets do not fit into their... Read More

0 to 60 in 4.5 Seconds

Speeding is illegal, yet we sell racing motorcycles and cars... Read More

Mini Moto Tips

These are some quick adjustments and tips for the B1... Read More

A Great Motorcycle Ride in Mexico: Queretaro

A beautiful ride across cities and places named World Heritage... Read More

Yamaha Motorcycles - Creativity and Spirit of Challenge

"If you are going to do something, be the best"... Read More

Personal Scooters are Not Just for Fun

Personal scooters are a highly valuable mobility tool for those... Read More

Ghost Minimoto Moto GP Reps ? What Are They?

What are Mini moto's? A Minimoto is a miniature version... Read More

Save Money on Used Motorcycle Parts

For every motorcycle enthusiast, it is indeed very taxing to... Read More

Suzuki Motorcycles - From Fine Loom Manufacturers to Major Motorcycle Company

Started in a small warehouse by Michio Suzuki back in... Read More

Minimoto Dirt Bikes, Miniture Motards - The Next Step Up from Battery Powered Toys

As your child grows out of their little bicycle and... Read More

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

With the depreciation on motorcycles being so enormous after they... Read More

Trackdays - Get the Maximum Enjoyment from Your Time on the Track

Many motorcyclists want to take their bikes onto the track... Read More

Know Your Mini Moto

The Mini Moto is a small scale replica of the... Read More

Frame Slider Design and Selection

Call them crash protectors, crash bobbins, fairing protectors or frame... Read More