Extra credit

September 1, 2016

Kimberly Kinchen, business network writer

Image: Richard Masoner

The inability to afford a bike keeps many potential riders off the road. So it’s exciting to see that in recent years bike shops and credit unions have begun partnering to offer bicycle loans. These partnerships reflect the growing popularity of bicycling and the reality that loans can lower the financial barriers that prevent some people from buying bikes.

Virginia Credit Union (VACU) is one example. According to Glenn Birch, VACU’s director of public and media relations, in its first year, VACU has issued $118,000 in bicycle loans, with purchases ranging from quality starter bikes that cost hundreds of dollars to more upscale road bikes that may cost a few thousand. The credit union partnered with local bike shops by coordinating social media campaigns and ensured that bike shop staff were well-informed about the program. The idea was first floated by a staff member, “as a creative way that we could reach out, meet the needs of active members of our credit union, and make bikes more affordable,” Birch explains.

Aztec Cycles in Stone Mountain, Georgia (pictured above) offers a layaway program for purchasing bikes.

Another approach to reducing the financial burden of buying a bike is layaway. Aztec Cycles in Stone Mountain, Georgia allows customers to pay off a bike in three payments spread over six weeks. “For some people, a good entry level bike that costs $570 or $900 is pretty steep,” says Michelle Dunbar, the shop’s co-owner. Layaway is especially helpful for customers who have not established strong credit histories. The shop sells two or three bikes a month on layaway and Dunbar reports that all their layaway customers have successfully completed their plans since Aztec started offering the option in 2011.

We’re all familiar with loans for cars, home improvement projects and school, but loans for bicycles are a newer development. Interest rates are usually higher for bikes (as opposed to cars) in part because they are structured as unsecured personal loans that don’t offer lenders as many options to recover their money if a borrower defaults. But rates, usually in the mid to high single digits, are lower than most credit card rates. Combine that lower interest rate with a fixed payoff date, and bike loans can be a good deal. They may even be financially prudent: a quality bike that replaces or supplements a car or transit commute or a gym membership could easily pay itself off in a year or two.

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