If you're in the market for a loan to purchase a motorbike for your personal use, as opposed to purchasing a bike for use in your business, the options for personal bike loans are a Secured Bike Loan and an Unsecured Personal Loan.
Secured or unsecured, which is the best bike loan? Good question but the answer is not quite as simple as choosing one or the other. There are a range of factors to consider including the features of each loan, the benefit or suitability to you of the loan elements, details around the bike you’re buying, and the offer on each type of loan that a lender may make you, but most importantly your own individual situation and requirements.
At Jade Bike Loans we handle each personal bike loan individually to ensure the loan offer we source is specifically suited to that customer. So offering a generic ‘secured v unsecured, which is best’ conclusion is not realistic. But what we can do is provide a detailed explanation of the features and perceived benefits of each loan type and possible case study style scenarios as ‘thinking points’ to assist you in making your decisions.
Personal Bike Loan Types
When discussing your bike loan requirements with your Jade Bike Loans consultant, you may be offered either a Secured Bike Loan or an Unsecured Personal Loan.
- The two loan types have some similar features and some entirely different features.
- A Secured Bike Loan is the most commonly used type of motorcycle loan.
- With a secured loan, the lender will use the bike as the security or guarantee against the loan. If the borrower defaults on payments, the lender holds the right to repossess the bike to recover monies owed.
- With an unsecured personal loan, no security is offered. This automatically raises the question – why would a borrower not offer the bike as security? We cover this further later in the article but the reasons may include: the condition/age/type of the bike as some lenders may not accept older models or specific types of motorcycles as security. More on that issue to come.
- As there is no security available for a personal unsecured loan, this type of loan is priced higher by the lenders as compared with a similar secured loan. This higher price reflects the higher risk if the borrower defaults on the loan, the lender does not have security to repossess to recoup any monies owed.
- This higher pricing is reflected in the interest rate – the unsecured loan attracts a higher interest rate than a secured loan.
- Secured bike loans have a fixed interest rate and unsecured personal loans are based on a variable interest rate.
- A fixed interest rate means the rate is fixed for the entire term of the loan so the total amount of the loan and the interest payable on the loan is fixed and known. A variable interest rate does just that – varies with the financial markets. Over the term of the loan, the interest rate may increase or decrease. As such the total interest payable on the loan over the loan term is not known or fixed.
- Combining the higher interest rate and the variable interest rate factors, the unsecured loan will, in most cases have a larger total interest payable over the same term as a secured loan.
- When you request a bike loan with Jade Bike Loans, you are assured that fixed or variable, the interest rate on your bike loan will be at the cheapest interest rates possible – it’s our signature move!
- Secured and unsecured both feature a fixed loan term and fixed monthly repayments.
- Extra payments are permitted with both types of loans.
- If you payout a secured loan before the end of the agreed loan term, break fees will apply. These fees are usually considered minimal.
- If you payout an unsecured loan before the end of the agreed loan term, no break fees will apply. This feature reflects the higher pricing and higher interest rate of this loan type.
For full explainers on Secured Bike Loans and Unsecured Personal Loans, head to the web pages we have dedicated to these loans.
Decision-making Thinking Points
Your Jade Bike Loans consultant can lay out the factual features of each loan and you are advised to seek independent financial advice in regard to your individual financial situation as the final decision is yours.
Here are some ‘thinking points’ for you…
- The lender may make the decision for you as they may not accept the bike you are purchasing as suitable security. Some older bikes or unique, custom models may fall into this category.
- If the bike you’re buying is a restoration project you may not wish to offer it as security as you may be intending to significantly increase its value with the restoration. As the loan term rolls out, the value of the restored bike may increase in value. If you’ve put all that love and effort into the bike resto, you may not want to offer it as security!
- If you choose to pay a large deposit on your bike purchase and as such the loan represents a smaller portion of the overall value of the bike, you may not wish to offer the entire bike as security.
- If you anticipate that you will be highly likely to pay out the loan before the end of the loan term, eg anticipating you will be in that position, the unsecured loan with no break fees may offer a financial benefit.
- If you need 100% certainty about the total cost of your loan over the entire term, the secured loan has a fixed interest rate and fixed elements.
You don’t have to make the decision upfront. You are welcome to start the bike loan discussion with a Jade Bikes Loan consultant and possibly request a quote on both loan types.
To discuss either a secured or unsecured loan for your bike, please contact Jade Bike Loans and one of our consultants will assist you. Call 1300 000 003
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