But here's the bad side-revolving loans sometimes have such low payments that you're not really paying down the principal amount on the loan, all your score. This is considered the break point between a decent risk and a poor one. If your credit score is at least a 620, then you're usually not going to have any problems getting a loan for your new ATV, but you should also recognize that other factors like your personal income and your level of existing debt are going to be considered, too. Anyone with a score below this threshold will be asked to increase the down payment or to get another person with a more solid credit rating to cosign on the loan. If your personal score is below 540, you may not be able to get a loan at all, even with substantial money down. One more important point, if you're younger than 18 or if you've never financed anything, not even a cell phone, then you probably don't even have a credit score! Sad to say, but you're almost certainly going to need a cosigner to vouch monthly payments go toward interest. This means you could be paying off that new four-wheeler for a very, very long time. What's more, revolving loans might have an attractive starting interest rate, but watch out for loans that raise the rate after 12 or 24 months. They're just trying to get you to trade the machine in for a new one later. And finally, most of these revolving loans charge a greatly increased default rate if your payment is late more than once in a 12- month period. Can you afford 27 percent annual percentage rate? Ouch!
The other category of loan, a conventional note, comes through a more traditional .financial institution like a bank or credit union or through an independent finance company. Those loans are for a fixed period of time like 36, 48 or 60 months, rather than an open-ended term like the revolving loan accounts. They also feature a fixed payment that will pay down the principal and the interest charge simultaneously. While your monthly payment is generally going to be a bit higher with this type of loan, for most people going the conventional route makes better financial sense. You know exactly what your rate is for the life of the loan, and you know exactly when it's going to be paid in full. If the loan is through a bank or credit union, they can be a bit more picky about your qualifying credit score, but the rates are going to be very competitive. If the loan is through a .finance company (or any institution that doesn't take deposits like a bank does), then you might find it easier to qualify but you can bet you're going to pay for it through a higher interest rate.
For most of us, financing is a necessary evil that allows us to enjoy a much nicer machine than we would be able to afford for cash. The simplest way to look at it is this: When you get a loan for a new ATV you're really buying two things, the four-wheeler and the money to pay for it. Just as you want to get a sharp deal on the machine, you need to know how much you're paying for the money as well. Now that you know how to figure that out, go back to the dealership and grab that new 450!
How To Find And Evaluate OE Finance Plans
Before you agree to finance any new ATV purchase, make sure to ask the dealer for all the details on every .finance plan he offers. It's reasonable for him to want to know your credit score, but before you fill out the app, ask him for the full rundown on every plan available.
All of the major OE manufacturers, including KTM and Polaris, have their own special retail finance plans. Any franchised dealer in good standing can offer those plans to qualifying customers. If the salesman is being cagey about the details, you can check them out for yourself on the manufacturer's website.