Motorcycle financing is a specific form of loan for the purchase of a motorcycle or scooter, be it new, used or zero kilometers, which provides for the deferred payment of the price, through monthly installments.
The motorbike loan is generally available on the market with a term from 12 to 60 months, at a fixed rate and variable rate, with a maximum amount limited to around 30,000 euros which can cover up to 100% of the purchase price of the motorcycle. The interest rates applied are generally lower than the normal consumer credit as the repayment of the debt is guaranteed by the motorcycle which, being a registered movable asset, can be subjected to attachment.
Being a finalized loan it can be proposed directly by the concessionaire, by virtue of the agreement stipulated with a financial institution. In this case the retailer, with a commission for the procurement of customers to the bank, proposes the financing to the customer and manages the entire file, from the collection of documents to the approval of the credit. Once the loan has been approved, the financial company provides the agreed amount to the concessionaire, while the applicant who purchased the vehicle pays the installment according to the agreed repayment schedule.
It is therefore not the customer who has the sum of the motorcycle loan; this is paid directly to the dealer. The applicant simply subscribes to the motorcycle loan and repays the monthly installments.
MOTORCYCLE PERSONAL LOAN
The request for financing in the dealership has advantages and disadvantages: on the one hand it can facilitate a greater discount on the purchase price, by virtue of the commission collected by the dealer. On the other hand, it does not allow the comparison of more financing products and the consequent choice of the most convenient loan, ie with the lowest APR . This is because in most cases the dealer has an exclusive agreement with a single financial institution.
Alternatively, the motorbike loan can be signed by the applicant independently at a bank or a trusted financial company before the purchase of the motorcycle. In this case the applicant receives the sum agreed by the credit institution on his current account and then proceeds to pay the purchase price to the motorcycle dealer.
Choosing the loan autonomously allows the applicant to compare several financing offers and the choice of the most convenient one, for example with the lower APR . Also in this case the applicant can freely dispose of the loaned amount, associating for example the purchase of the bike with the accessory costs (transfer of ownership, stamp, insurance) or other family liquidity needs.
Obtaining a motorbike loan requires the normal guarantees provided by consumer credit or the availability of a continuous and certain monthly income to repay debt installments and good credit reliability. In fact, even in the finalized loans, the data is checked at the risk center : any negative reports lead the financial company not to grant any loan.
Often, in order to limit the risk of insolvency, credit institutions require the signature of a co-obligor or a third guarantor as guarantee , guaranteeing the success of the transaction. This is a rather common request, in the presence of particular conditions (such as an applicant with a recent seniority or a particularly high amount).
THE ELEMENTS OF THE CONTRACT
The law states that a motorcycle loan contract must contain the following elements:
- the interest rate charged;
- any other price and conditions applied, including the higher charges in the event of default;
- the amount and method of financing;
- the number, amounts and expiry of the individual installments;
- the annual percentage rate of charge (APR);
- the detail of the analytical conditions according to which the APR can possibly be modified;
- the amount and purpose of the charges that are excluded from the APR calculation;
- any guarantees required;
- any insurance coverage required and not included in the APR calculation.
NON-PAYMENT OF AN INSTALLMENT
The interruption of the repayment of the loan entails the immediate non-fulfillment of the financing institution and the risk of unpleasant consequences:
- the interest due would be increased, with the application of a default;
- there is a risk that your name will be included in the list of latecomers and / or reported to credit protection bodies (the Central Risks), which will share information with the entire banking and financial system. The result will be the worsening of the customer’s creditworthiness and a consequent greater difficulty in obtaining credit in the future.
Failure to timely pay even a single installment authorizes the lending institution to unilaterally terminate the contract. The customer will be required to pay all bank and protest charges as well as all the expenses incurred by the Institute to recover the sums due, in addition to a possible penalty.
The law guarantees the consumer the possibility of early repayment of the loan . If the consumer decides to choose this option, in addition to the repayment of the residual capital, he could pay a penalty that must not exceed, by law, 1% of the financed capital; the exact terms of the penalty are reported in the signed contractual conditions.
Below we illustrate in a schematic way some specific evaluation criteria of the first home loan.
- Risk policies : each Institute applies its own risk policy in the assessment of requests, based on the statistical data it has (credit scoring). This data is the tool that allows the Institute to keep insolvencies below a certain level.
- Income level : the acceptance of the requests is normally also subordinated to the evaluation of the income level of the applicant and to the relationship between the latter and the possible repayment installment.
- Credit reliability : finally, the creditworthiness of the applicant is of great importance. It is important to emphasize that this evaluation has no “moral” meaning. The Institutes are limited to estimating the level of risk connected to each request, also on the basis of the indications transmitted by the Central Risks. If the credit history of the applicant presents some “flaws” (delays in repayments of previous loans, unpaid debts, etc.) the probability that the request will be accepted is obviously lower. In some of these cases a valid alternative is constituted by the Assignment of the fifth: this solution, offering the appropriate guarantees to the financing Institute, allows the adoption of more flexible evaluation criteria.
When choosing between multiple financing offers, it is good to consider the overall cost of each loan , not limited to the assessment of the monthly installment only. However, this is not a simple operation since the items of expenditure of a loan can be numerous (amount disbursed, interest, ancillary charges, possible initial expenses, insurance costs) and are not easily measurable in an immediate manner.
In general, the elements that should be considered before signing a loan agreement are:
- TAN (Nominal Annual Rate) : represents the interest rate, expressed as a percentage and on an annual basis, applied to the financed capital (sometimes gross of any insurance costs or preliminary investigation costs). It is used to calculate, starting from the amount financed and the duration of the loan, the portion of interest that will be paid to the financing institution and which, added to the capital share, will determine the repayment installment.
In our section dedicated to calculation tools , you can calculate the amount of the monthly installment and the total expenditure for interest, indicating the main characteristics of the financing that you intend to request.
- TAEG (Global Effective Annual Rate) : a measure, expressed in percentage terms, with two decimal places and on an annual basis, of the total cost of the loan. Unlike the TAN, the APR is inclusive of any additional charges such as investigation costs and insurance costs, which are charged to the customer.
However, under certain conditions, Italian legislation allows a certain discretion, excluding or including some items in the calculation of the APR: insurance costs, for example, if optional, can be excluded from the calculation. Pay attention and carefully consider your overall expenditure, analyzing each time the items of the offer you are offered.
In our section dedicated to calculation tools , you can calculate the loan APR and compare loans with different characteristics, and easily determine the financing from the most advantageous economic conditions.