Whether you ride for fun, for sport, or for work, an ATV is a great vehicle to have. It can help you get around the ranch quickly, harvest your deer easily, or zip through a terrain park. The problem, however, is that the price tag is generally out of reach for most people.
If you need an ATV for work, or just want one for fun, but you are struggling to come up with the funds to buy one, you will probably want to look into how to get an ATV loan. Here is what you need to know.
Getting an ATV Loan
Not all loans are created equal, but there are many similarities between them. One of those is the fact that your eligibility, and ultimately your interest rate, is based on your credit score. It boils down to this: a higher credit score means you will have an easier time getting the loan, and enjoy a lower interest rate.
Here are a few important things to keep in mind when you go to apply for an ATV loan.
Expect a Down Payment
Just like a vehicle, as soon as you use an ATV it will depreciate in value. To offset the risk, most lenders won't loan you the full amount. Before you even apply, expect to pay between 10 and 20 percent as a down payment. The good news is that your monthly payments won't be quite as large when you put money down on your loan.
Expect Higher Interest Rates
There are some debts that are risky, and some that are not as risky. For instance, a home loan is actually less risky for the lender because they can always foreclose the house and recoup the loan by selling it. While the ATV is used as collateral, they depreciate much quicker than a home. To offset the risk, lenders will usually charge a higher interest rate.
Expect to Pay for Insurance
Some states don't require you to have insurance on motorcycles and ATV's. That is one big reason many people choose to use this form of transportation. However, banks don't like to loan money for something that can be destroyed. For instance, you can't have a mortgage on your house, but not carry homeowner's insurance. You also can't get a loan for a vehicle without having full coverage.
If you want to finance your ATV, you will likely have to carry insurance so that the lender can get their money if you are in a wreck.
Expect to Pay it Off Early
Like all loans, make sure you get one without a prepayment penalty. Then, make sure that you are paying more than the minimums. Let's suppose you get a loan for an ATV, and you finance $5,000 at 4.5% interest for four years. Over the life of that loan, you end up paying $114 per month, and spend $472 in interest charges. By bumping up your payments by only $20, you pay the loan off seven months early and save $75 (while that may not seem like a lot, it's a savings of 16 percent).
Financing an ATV
If you read a lot about personal finance, you will hear a lot of people telling you not to ever finance; only pay cash. But there are times when that's not an option. Keep your emergency fund stocked, and finance the ATV. The payments are low, the interest rates are likely decent if you have good credit, and you can always pay it off quickly if your finances pick up.
Just keep in mind that if you are trying to get an ATV loan, and you have poor, or no, credit, you will end up paying a lot more in interest. If that were the case, then you would likely be better off saving up a bigger down payment or paying for the ATV fully in cash.