Singapore is known to have one of the best public transportation systems in the world. You can zip around the city using the MRT (mass rapid transit), explore the extensive network of bus routes, and of course, you also have the option to travel by taxi. However, at the end of the day, nothing quite replaces the independence and speed of your own vehicle to go wherever you want, whenever you want. It is common knowledge that cars are ridiculously expensive to own in Singapore. There is another option: a motorcycle or a scooter. Here's what you need to know about motorcycle loans so you can be on your way to your own set of wheels.

motorcycle loan

Ionov Artem/

What is a Motorcycle Loan?

A motorcycle loan is similar to a car loan. In both cases, you are purchasing a vehicle by borrowing a lump sum from a lender. You are expected to pay the loan back in fixed monthly installments for the duration of your loan tenure.

Motorcycle Loan Calculator

As with any loan, you first need to use a loan calculator to see if you can actually afford the vehicle. You may reason that because your new motorcycle will be your primary mode of transportation, you absolutely need to purchase it. However, be reasonable with what you can afford to pay back. A motorcycle loan calculator helps you decide if the loan fits your life. You can adjust the options to see the monthly installment amount, the loan length, and an excellent loan calculator will let you see exactly how much you are paying in interest. Don't forget to input a reasonable interest rate. Of course, this is only an estimate of what a bank or credit union will actually give you, depending on your credit score and eligibility.

I would be remiss if I did not mention all the additional fees that come with owning your own motorcycle or scooter. Remember to factor in the Registration Fee, the Excise Duty, and the road tax. For more information, visit the Land Transport Authority's website to estimate your cost. When calculating your budget, be sure you can afford your monthly payment as well as petrol for your commute and the fees and taxes attached to your new motorcycle and scooter.

Type of Loan

Motorcycle Loan

You will need to find a bank that offers motorcycle loans specifically. Unfortunately, this type of loan is becoming more and more difficult to find. Furthermore, most lenders do not allow a borrower to apply for an auto loan and use that money to purchase a motorcycle. This is because motorcycles are simply more dangerous than a car and have a higher risk of injury or death to the rider and damage to the collateral, which is the motorcycle itself. It is a solemn thought to think about roadside accidents. However, regrettably, an injury means that you are more likely to default on your loan and the bank will lose their investment.

Personal Unsecured Loan

An alternative to a motorcycle loan is to take out a personal unsecured loan from a bank. Personal loans can be used for just about anything. The application process will take a few days and require proper documentation. The bank will also run a credit check to determine how reliable you are in paying borrowed money back. If you have a decent credit score, you will likely be able to secure a low-interest rate from a bank. Be sure to shop around for the best interest rate.

Motorcycle Dealerships In-House Financing

Most motorcycle dealers also offer in-house financing options. They all claim to offer competitive interest rates. Similar to auto dealers, the in-house financing options are usually more expensive than what a bank may offer. However, dealerships tend to have more incentives to sell to you. Look carefully at the interest rates and all the additional fees that they tack on to your loan contract. It is advisable to get comparative quotes from other sources before walking into the dealership.

P2P Lending

In recent years, many borrowers have also begun looking at peer-to-peer or P2P lending sites instead of traditional financing. These sites connect individual borrowers to organized personal investors that lend unsecured loans. Of course, be aware that regulators are still trying to manage this new type of funding because it virtually eliminates formal financial institutions. However, because Singapore is a cash-intensive economy, this may be a good option for those who do not possess a credit card or even a bank account and thus may not qualify for a traditional loan.

Things to Avoid When Purchasing a Motorcycle

It may be extremely tempting to buy a motorcycle with your credit card, especially if you have a high credit limit. You can avoid the credit check and the entire loan application process altogether. However, this is extremely risky. Credit cards are known to have notoriously high-interest rates and harsh penalties for missed payments. If you fail to pay your credit card bill, you may suddenly find yourself in a pile of debt that tends to snowball. Furthermore, this one purchase will likely max out your credit card, hinder you from making future purchases that you may genuinely need, increase your credit utilization ratio, and in turn, cause your credit score to drop.

Another mistake to avoid is using your house as collateral for your motorcycle loan. Although secured loans are more attractive to banks and the lower interest rate may be tempting, you should never risk your home for a vehicle. If you are insistent on putting up collateral, consider any stocks or other investments as an alternative. You can also use your savings account or future paychecks as collateral.

Final Thoughts

A motorcycle is a less expensive option for your own set of wheels. Although banks may not be inclined to lend you a motorcycle loan specifically, there are several loan options available to you. As with any loan, be sure you can afford the monthly payments and all additional fees and taxes. I hope you will be successful with your loan payments as the wind whips through your hair as your motorcycle zips through the busy streets of Singapore.