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When acquiring a motorbike through financing, you can reduce the interest amount by putting down an upfront deposit. High interest rates can have a big impact on motorbike finance costs, inflating your monthly repayments and the overall purchasing cost.

Let us take a look at how an upfront deposit can help reduce the amount of interest you will pay on your motorbike loan.

Putting Down an Upfront Deposit

An upfront deposit, also known as a down payment, is a significant sum of money put forth by the borrower when initiating a loan. The deposit forms a percentage of the total cost of the loan, thereby reducing the overall loan size.

People often try to put down a deposit somewhere in the region of 20% to 30% of the purchase price. Doing so reduces the amount of money that you borrow, subsequently reducing the lender’s risk. Lower-risk loans are associated with lower interest rates. As such, the larger the upfront deposit, the better the loan term you can secure.

How Interest Reduction Works on Motorbike Loans

The interest rate that you are offered is typically dependent on a few factors, including your credit score. The more risk you present according to your credit history, the higher the interest rate will be. The same is true in reverse.

Outside of improving your credit score, one of the ways that you can lower your perceived risk is to attach collateral. You can do this by taking out a secured loan or making a large upfront deposit. Sometimes, you can do both.

Motorbike loans are typically secured loans, meaning the bike itself is attached as collateral. This lowers the risk for the lender. Making a substantial deposit will not only further reduce the principal amount of the loan, but it will also improve your risk rating.

Other ways of reducing finance interest include negotiating with the lender. Naturally, these negotiations are subject to the lender’s discretion.

The Benefits and Considerations of Putting Down a Deposit

Putting down an upfront deposit reduces the loan amount required, thus leading to lower monthly repayments.

To secure a substantial deposit, meticulously plan your finances and prioritise savings prior to applying for financing. This takes time, planning and discipline.

At iCREDIT, we assist our clients in securing motorbike finance by comparing loan offers from a variety of different lenders to ensure the best financing deals for our customers. Contact us to learn more about how we can assist you.

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