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If you're considering purchasing a motorcycle but don't have the funds upfront, motorcycle loans can be a great option to help you finance your purchase. However, before you start the application process, it's important to understand the steps of a motorcycle loan.
In this article, we’ll discuss the seven steps of getting a motorcycle loan, how to get a motorcycle loan with bad credit, the best lenders for getting a motorcycle loan, and more.
- You can get a motorcycle loan by paying cash, using a loan from the dealer, or using motorcycle loans from a bank, credit union, or unsecured loans from online lenders.
- The higher your credit score, the better the rate you’ll receive on your motorcycle loan.
- The quickest way to get a motorcycle loan if you have bad credit is with an online lender, as they are typically able to approve loans faster and have less stringent qualification requirements.
- To get out of a motorcycle loan, you can sell your motorcycle and use the proceeds to pay off the loan, refinance the motorcycle loan, or simply pay off the loan using cash.
7 Steps to Getting a Loan for a Motorcycle
To help you navigate the process with ease, we've put together seven essential steps to getting a loan for a motorcycle.
1: Know Your Credit Score and History
Before applying for a loan, it's essential to understand your creditworthiness. Lenders will review your credit score and history to assess your loan repayment ability. Obtain a copy of your credit report and check for any errors that may affect your credit score. If you have a good credit score, lenders are more likely to offer you favorable loan terms and lower interest rates.
2: Research Motorcycle Financing Options
Explore the various financing options available, such as traditional lenders like banks and credit unions, online motorcycle loans, and manufacturer financing. Each option has its pros and cons, so take the time to compare rates, repayment terms, and any special offers available to find the best fit for your needs.
3: Set a Realistic Budget
Before applying for a loan, assess your financial situation and determine how much you can comfortably afford to borrow. Consider factors such as your income, monthly expenses, and existing debts. Setting a realistic budget will help you avoid taking on a loan that could strain your finances in the long run.
4: Shop Around for the Best Rates and Terms
Don't settle for the first loan offer you receive. Shop around and compare rates, fees, and repayment terms from different lenders. Look for competitive rates that offer favorable terms and conditions. Remember, even a small difference in interest rates can save you a significant sum of money over the life of the loan.
5: Prepare Your Documentation
Gather all the necessary documents for the loan application process. This typically includes proof of income, identification, proof of residence, and any additional supporting documents specific to the lender's requirements. Having everything prepared in advance will streamline the application process and help expedite loan approval.
6: Submit Your Loan Application
Once you've chosen a lender and gathered the required documentation, it's time to submit your loan application. Unsecured loans from online lenders often provide a quick and straightforward application process, while traditional lenders may require a visit to a local branch. Follow the lender's instructions carefully, and provide all requested information accurately to avoid any delays.
7: Review the Loan Agreement Thoroughly
Before signing any loan agreement, carefully review all the terms and conditions. Pay close attention to the interest rates, loan terms, monthly payments, origination fees, and any other charges. If you have any questions or concerns, don't hesitate to ask your loan officer for clarification. Understanding the agreement fully will ensure that everything runs smoothly down the road.
How to Get a Motorcycle Loan with Bad Credit
If you have bad credit and are looking to get a motorcycle loan, there are still options available.
While traditional lenders may be hesitant to approve your loan application, alternative lenders specialize in providing loans to individuals with less-than-perfect credit.
Many unsecured loans from online lenders often have more lenient requirements and may be willing to work with you despite your credit history.
OneMain Financial, for example, does not disclose a minimum required credit score and is known for providing credit score flexibility to those looking for motorcycle loans.
If you do get approved for a motorcycle loan with bad credit, it’s recommended to try and pay off the loan as quickly as possible. The reason for this is due to poor credit, you most likely received a high interest rate. The quicker you can pay off the loan, the more you’ll be able to save in interest.
Improve Your Credit Score to Qualify for a Better Rate
If you are struggling to get approved or do not want to pay a high interest rate, you could choose to pause the motorcycle purchase and work on building your credit for the next few months. If your credit score improves during that time, you’ll most likely qualify for a much better rate than had you purchased a motorcycle earlier.
How Do Motorcycle Loans Work?
Whether you're a seasoned rider or a first-time buyer, understanding how motorcycle loans work is crucial to make informed financial decisions.
How Long Is a Motorcycle Loan?
Typically, motorcycle loans have loan terms ranging from two to seven years. The duration of a motorcycle loan, also known as the loan term, can vary depending on several factors including:
- Your credit history
- The amount borrowed
- The lender and the type of loan
Borrowers who want to pay off their loan quickly and minimize the interest paid over time often prefer shorter loan terms, such as two to three years. Shorter loan terms also mean higher monthly payments but can lead to significant savings on interest charges.
What Is the Average Interest Rate on a Motorcycle Loan?
The average interest rate on motorcycle loans varies depending on several factors. The interest rate can range anywhere between 3% to 20%. Typically, the interest rate differs based on the borrower's credit history, the motorcycle's value, and the loan duration.
What Credit Score Do You Need to Finance a Motorcycle?
For motorcycle financing, lenders usually rely on the borrower's FICO score. A score of 670 or above is considered good, and the higher the credit score, the better the interest rate.
However, this isn't a strict rule, and lenders consider other factors, as well. While having a good credit score helps, it's only one of the factors that lenders consider when financing a motorcycle.
Lenders also look at the debt-to-income ratio, payment history, employment history, down payment on a motorcycle, and the loan amount. If you're thinking about financing a motorcycle, work on improving your credit score, pay your bills on time, and keep a stable job for at least a year.
How Soon Can You Refinance a Motorcycle Loan?
The first thing to consider when refinancing motorcycle loans is whether or not you're allowed to do so. Some lenders have specific rules regarding refinancing that must be followed. Generally, lenders require that you wait at least six months before refinancing, but this time frame can vary. Ensure that you carefully read your loan agreement to understand the lender's specific policies.
How to Improve Your Chances of Getting Approved for a Motorcycle Loan
Getting approved for motorcycle loans can be tricky, especially if you don't have a high credit score. Here are steps you can take to increase your chances at getting approved for a motorcycle loan:
Consider secured motorcycle loans
Secured motorcycle loans use the motorcycle as collateral. This means that if you default on the loan, the lender has the right to repossess the motorcycle. Using the motorcycle as collateral gives the lender some security, which can make them more likely to approve your loan.
Try getting a loan directly from a motorcycle dealership or manufacturer
Some motorcycle manufacturers and dealerships offer financing options to customers. These loans may come with special promotions and discounts which can make them more attractive than loans from a bank or credit union. Be sure to shop around and compare offers before accepting a loan from a dealership or manufacturer.
Improve your credit score and debt-to-income ratio
When lenders look to approve you for a motorcycle loan or auto loan, they’re going to look closely at your credit score and your debt-to-income (DTI) ratio. Your debt-to-income ratio is the ratio of debt you have compared to your income. To lower this ratio, you either need to reduce your debt or increase your income
The higher your credit score and lower your DTI, the better your chance at getting approved.
To improve your credit score, make sure to pay all of your bills on time, ask for higher credit limits on your credit cards, dispute any errors on your credit report, and make sure not to max out all of your credit.
Where to Get a Motorcycle Loan: Examples and Lenders
Finding the right loan offers with favorable terms and rates can be overwhelming. Luckily, we’ve researched and compiled a list of the best motorcycle loans currently available.
1. Lightstream Loans
Lightstream Loans tops our list of the best motorcycle loans due to its low interest rates, flexible repayment terms that range from 24-84 months, and lack of fees. The company offers personal loans ranging from $5,000 to $100,000, which can cover the cost of purchasing or refinancing a motorcycle. Additionally, Lightstream Loans provides a unique Rate Beat Program in which it offers to beat any qualifying interest rates presented by an eligible competitor.
2. OneMain Financial
OneMain Financial is a trusted institution that has been around for over a century. Although their personal loans come with higher interest rates than some competitors, they offer motorcycle loans ranging from $1,500 to $20,000. Additionally, OneMain Financial may be a viable option for riders with less than perfect credit, as they may still approve a loan as long as you have a stable and sufficient income and a valid bank account.
How to Get a Loan for a Used Motorcycle
The process of getting a loan for a used motorcycle is very similar to getting a loan for a new one. You still have several options to consider in order to find the best loan for your needs.
One option is to explore online lenders such as LightStream or Credible. These lenders offer unsecured personal loans with competitive rates and flexible repayment terms for both new and used motorcycles. They can provide loan amounts ranging from $5,000 to $100,000, depending on your credit score and financial situation.
Another option to consider is a credit union. Navy Federal Credit Union, for example, offers motorcycle loans with competitive rates and various term options for both new and used motorcycles. They may even offer rate discounts for active duty and retired military members.
Traditional lenders like Wells Fargo can also be a viable option for financing a used motorcycle. They provide loans for both new and used motorcycles with competitive rates and flexible repayment terms.
In all cases, remember that lenders will assess your credit history and credit score to determine your eligibility and interest rate. Having a good credit score will increase your chances of getting approved for a loan and receiving lower interest rates.
Final Word: Explore Your Motorcycle Loans Today
Securing a motorcycle loan may seem like a daunting task, but with careful preparation and research, it can be a smooth and rewarding experience. By evaluating your financial situation, checking your credit score, researching loan options, gathering necessary documents, submitting your application, and reviewing and signing the loan agreement, you can secure your motorcycle loan today and embark on your next thrilling adventure. So, don't wait any longer - start exploring your motorcycle loans online and get ready to rev up your engines!