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 abeyant for a buyer owing added on their motorcycle loan than the bike is worth it certainly aerial. Owing added on your bike than it is worth is generally referred to as the apple of “up side Down#8221;.

Abounding bodies finding themselves in this bearings ascertain that financial lessons are sometimes the hardest and most expensive to apprentice. Motorcycle loans of added than 48 months (especially without a down payment) put you in the position of owing added than the amount of the bike.

Let’s booty a attending at this phenomenon.

Aboriginal, the absorption calculation your lender uses can accomplish a ample aberration in your bearings, especially in the aboriginal 18 months. There are two primary absorption calculations, pre-computed (combined with rule of 78) and child’s play absorption.

Pre-computed absorption combined with Rule of 78, is typically the worst bearings for a buyer as most of the absorption is paid in the aboriginal 24 months. Accordingly, in the aboriginal 24 months babyish 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 acquisition themselves owing added than the bike is worth. Statistics appearance that the average owner trades in every 18-24 months.

Child’s play absorption on the other hand, is much added favorable for buyers since absorption accrues on the balance of the loan. However, buyers that extend their loans for greater than 48 months can still acquisition themselves up side down with child’s play absorption. This is especially accurate if a down payment is not fabricated. The astuteness this occurs is that the motorcycle depreciates faster than the principal is paid; leaving the balance owed to the lender to be added than the bike can be sold for.

A accepted appearance that abounding bodies accept is that they will aloof surrender their motorcycle to the lender if they are caught in an “up side Down#8221; position. If you are considering this choice don’t! Your worries accomplish not aloof borderline after your bike is surrendered or repossessed; in actuality they are aloof alpha. The lender will sell your bike at an auction for much less than it is worth. You will still owe the aberration 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 amenable for owing the lender $3500. To accomplish it worse lenders may tack on hefty auction fees which you will owe as able-bodied. So the grasp aftereffect is that you are any more amenable for manufacture monthly payments on a bike you can no longer ride.

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

1. Acquisition a lender that uses child’s play absorption. Avoid lenders that statement pre-computed / Rule of 78 absorption calculations.

2. Always ace shot to put almighty dollar down on your purchase.

3. Ace shot to avoid motorcycle loans that extend former 36 months.

About The Author

Jay Fran is a acknowledged author and publisher for a website that specializes in Motorcycle Loans: Bad off Credit Approvals Available. A comprehensive resource on child’s play absorption motorcycle financing, bad off credit, advanced, used and bad credit motorcycle loans.


Originall posted December 15, 2011