There is some good info here from the previous posts.
One big thing to consider is, try not to get your mind set on the lowest monthly payment. The shorter the loan term, the least amount you pay overall.


Try this site http://www.bankrate.com/calculators/...alculator.aspx
Plug in your numbers and then be sure to click the 'amortization table' link in the section below. This will show you the amount of interest that you pay vs. the amount that actually goes towards principle over the loan term.


I would try to stick to a 4 year loan if possible. It may take a bit of cutting and budgeting from other expenses but it will save you money in the long run. In addition, if you are able to make an payment or even a portion of the payment towards the principle a few times a year, then definitely do so. Your extra payment should always be paid the very next day after your actual bike payment date is due.


I walk into the bank and pay an extra $150 per month towards principle the very next day after my bike payment is deducted from my account. To make this happen, I simply set money aside $1800 from last year's tax return to do this. My 4 year loan will be paid off in just less than 3 years and I will save a lot of money in compounded interest.

 

Could you explain this. I have always just paid more with every payment ($25 or $50 per) How would paying the day after be better?

 

It is better for the lender, they get to collect an additional day's interest.

 

If you make extra payments, make sure the bank deducts it from the principal. Sometimes they just pay future interest with it.

 

you can go on line and find loan calculators -- sounds like your numbers are skewed wrong

 

Of course, and I will try to explain this as best I can.


Okay so, the majority of loans are based on compound interest which means interest is compounded daily.
Say for example your payment is due on the 1st of the month. By making an extra payment towards 'principle only' means that the entire amount of the extra payment will go towards the principle before the daily interest is compounded for that day.
The total principle amount that you still owe on the loan is now lower. So on the next day after your extra payment, the interest that compounds from your new principle balance will be on that lower balance still owed on your loan.

 

For example:


Your loan amount is $10,000
Your APR is 10%
Oct 1st, your first monthly payment will be $212.47
The principle paid from your first payment will $129.14 and you pay $83.33 towards compound interest. Your remaining loan balance is now $9,870.86


Nov 1st, your second monthly payment is still $212.47
The principle paid from your second monthly payment will be $130.27 and $82.26 towards compound interest. Your remaining loan balance is now $9,740.65


If you take this same loan and pay $100 the very next day, then on the second monthly payment of $212.47 you are only paying interest on $9,770.86 ($9,870.86 - $100)


It seems like you are saving pennies at first but if you create an entire table of making and extra $100 payment every month, your loan will be paid off in 37 months vs 60 months and you will save 23 months of paying interest on your loan.

 

Excel does this very easy for you. It has many loan templates.

Also if you are insane if you are paying or are willing to pay nine percent interest these days. You should pay between one and three percent. I think Harley is advertising even lower rates than that on new bikes.

Or you could just pay cash and avoid the credit score games altogether.

 

When I need a loan I go with USAA or Navy Federal Credit Union. If you can use either of these I'd look them up first. I've always had good luck with both. Just a suggestion.

 

Just putting this out there: Some of us live by different rules.

If you can't put 100% down, you can't afford it.

If you can afford to put 20% down on a $20K+ bike, you can afford to pay cash for a bike. Plenty of them out there.

Debt is slavery.

Or you could just add $150 to the payment in the first place. There's nothing special about paying it on the next day.

On a simple loan, any payment you make, ever, will be applied to accrued interest first, and then principal second. If you follow the initial amortization schedule, the accrued interest goes to zero with each payment. Any additional amount you pay goes to principal. There's no where else for it to go. The bank's books have to balance at all times.