Powersports Finance Details

The finance industry has unique challenges when it comes to power sports financing. Watercraft, ATVs, snowmobiles and motorcycles depreciate at a faster rate than automobiles and can be more expensive to repossess.

In order to mitigate risk, lenders must conduct proper asset checks and comprehensive credit assessments using a dynamic credit scoring model. They also need to replace manual procedures with a state-of-the-art platform that parses credit reports and DIC valuations. It should include a configurable model and an intelligent scoring engine that incorporates an automated decision-making tool.

Credit Requirements

Powersports Finance is a more risky area of lending than automobiles because of the steep depreciation curves found in many types of powersport equipment. Consequently, lenders need to conduct asset checks and comprehensive credit assessments.

The most effective way to do this is by using a state-of-the-art Powersports financing platform that includes dynamic credit scoring, debt-to-income calculations (DIC), and auto-decisioning. The platform should also provide a configurable model for each powersport product offering and a scoring engine that parses credit reports and loan applications.

Debt-to-Income Ratios and LTV Calculations

Powersport finance lenders calculate debt-to-income ratios by dividing the borrower’s monthly income by his or her monthly debt payments, which include credit card bills, auto loans, student loans, alimony, and child support. These calculations exclude utility bills, rent, and mortgage payments.

Because powersports finance transactions are likely to face regulatory and disclosure requirements similar to auto lending, dealers should adopt software solutions that ensure documentation compliance. These systems should store key transaction documents like contracts, disclosures, and titles. They should also be compatible with the Electronic Fund Transfer Act and store transaction history.

Interest Rates

Powersports financing is usually more difficult to obtain than traditional vehicle loans, as lenders must take on more risk. Because watercraft, ATV’s, snowmobiles and motorcycles depreciate significantly faster than automobiles, lenders face a higher chance of repossessing these vehicles in the event of default.

However, if you’re in the market for a new or used ATV, UTV, snowmobile or jet ski and have good credit, there are some options available. For instance, you can compare offers from online lenders and some credit unions.

The best way to find the most competitive rates for your powersports loan is to shop around. Use a tool such as the one offered by LendingTree to see what other lenders have to offer you for a given loan amount, rate and term.

LTV

Lenders use the loan-to-value (LTV) ratio to help assess a borrower’s creditworthiness and ability to repay a mortgage or other type of asset-secured loan. A high LTV means the lender is taking on more risk than it would with a lower one, and may charge higher interest rates or deny your application if your credit is in question.

The LTV is calculated by dividing the amount of money you want to borrow against the value of a home or other property. It’s a commonly used measure in real estate transactions, but it also has implications when financing other assets like vehicles or boats.

Increasing your down payment is a common way to lower your LTV. Saving up for a larger down payment isn’t always easy, but it can make a big difference in your monthly payments. It’s also an effective strategy to build up equity in your home or car over time.

Down Payment

There are a lot of factors to consider when deciding on a powersports finance plan. This includes your credit score, interest rate and loan term. In addition, you should be aware that your down payment plays a role in how much you will owe.

A hefty down payment can make your monthly payments more manageable and may even entice lenders to offer you a lower interest rate. For example, if you put down 10% or more on your new ride, you could enjoy an interest-free period for as long as six months.

To make sure you get the most out of your investment, be sure to shop around for the best possible deal. Use a loan comparison website that can provide you with up to five quotes from multiple lenders. You can also use a calculator to figure out the most cost-effective route for financing your new powersports vehicle. The most important factor is to find the right lender for you and your unique needs.