Everything you need to know about motorcycle credit

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Before you hit the road with a new bike, you might need a motorcycle loan to pay it off. Here is what you need to know about motorcycle loans. (iStock)

Even though motorcycles are generally cheaper than cars, you might need a loan to buy one if you don’t have enough money. You can apply for a loan if you want to improve your bike. Or, maybe you can pay for a motorbike in cash, but opt ​​for a loan to help build your credit, especially when interest rates are low.

If you are considering using a personal loan to finance your motorcycle purchase, check out Credible to compare personal loan rates in a few minutes.

What is a motorcycle loan?

Motorcycle loans are either personal loans or specialized loans that you use to purchase a motorcycle or ATV. A motorcycle loan is like a car loan: the lender extends the financing and you repay the loan in monthly installments with interest. Loan amounts are generally lower for motorcycle loans than for cars, trucks or other vehicles.

Where can I get a motorcycle loan?

You have several motorcycle loan options to help you buy the motorcycle of your dreams.

  • Online lenders – These lenders don’t have the physical overhead to handle, so you can find more competitive rates and a streamlined application and funding process.
  • Banks – You may prefer to work with a banking institution that you know, especially if you already have an open account.
  • Credit unions – Interest rates from credit unions tend to be lower than those from traditional banks. Credit unions generally require membership in order to offer you a loan, but these requirements are often minimal.
  • Dealers – If you buy a motorcycle from a dealership, you may be able to apply for financing from the dealership. While this is convenient, the dealership may require a down payment and may overcharge your APR. Be sure to compare several loan offers before signing on the dotted line.

How to compare motorcycle loans

When shopping for a motorcycle loan, compare the important factors for each lender, including the following:

  • Loan amounts – When you compare prequalified offers, you may cross off your list of lenders who cannot offer you the amount you need. You will also need to make sure that the monthly payment is within your budget. You can use a personal loan calculator to get an idea of ​​how much you can afford to borrow.
  • APR – The annual percentage rate, or APR, takes into account the total cost of the loan, including your interest rate and any fees you owe. A lower interest rate usually means your loan will cost less overall. The interest rate you are offered depends on your credit history, the length of the loan repayment period, and other factors.
  • Repayment Terms – The repayment term is the time you have to repay the loan. Personal loan conditions generally range from 12 to 60 months or more. Longer loan terms mean lower monthly payments, but you’ll end up paying more interest over the life of the loan.
  • Costs – Keep an eye on the fees when you compare different loan offers. Read the loan agreement and look for fees such as origination costs and closing costs. Your lender may even impose a prepayment penalty if you prepay your loan.

You can start comparing prices by looking at Credible’s list of partner lenders who offer motorcycle loans.

Guaranteed or unsecured motorcycle loans

Many motorcycle loans, like those from dealerships, are secured, which means you have to use the motorcycle or other property as collateral. Keep in mind that when you have a secured loan, the lender can repossess your collateral if you don’t make your payments.

If you don’t want to risk losing collateral with your loan, you can go for an unsecured personal loan. Unsecured personal loans are more risky for the lender because they cannot recover any cost if you do not pay back your loan. To help mitigate the lender’s risk, unsecured loans may have higher interest rates and require higher credit scores for approval.

How to get a motorcycle loan?

Even if your motorcycle loan isn’t as important as a car loan, you still want to make sure you’re getting the best deal possible. The good news is that you can usually apply for a motorcycle loan online. Here’s a simple four-step process for getting a motorcycle loan:

  1. Review your credit. Lenders will look at your credit rating and income to determine if you qualify for a loan. This is especially true with unsecured loans. It’s better to first examine your credit report, search for damaging mistakes and dispute the mistakes you find.
  2. Figure out how much you can afford. Getting approved for a motorcycle loan will be pointless if you can’t afford it. Run the numbers with a loan calculator and make sure you have enough margin in your monthly budget to pay off a motorcycle loan.
  3. Compare lenders. When you compare the rates of several lenders, you will quickly see how different the offers can be. It’s a good idea to choose the lender that offers the lowest APR and fees while ensuring that the monthly payments will fit your budget.
  4. Apply for a loan. Once you have chosen a lender, all you have to do is submit your application. Usually, you will need to provide your contact details, social security number, and some basic financial documents. The lender may ask you for supporting documents, such as a driver’s license and a W-2. You will likely receive a decision on your loan quickly, especially if you apply to an online lender.

What credit score do I need to get a motorcycle loan?

It is possible to get a motorcycle loan with a lower credit score. Many personal lenders approve borrowers with poor to fair credit. But be aware that you will need good to excellent credit to get the best rates and conditions. This means that your credit score must be at least 700 to be eligible for the best deals.

What are the typical repayment terms for motorcycle loans?

If you get a motorcycle loan through a dealership, your repayment term typically ranges from one to seven years. Personal loans generally have a shorter repayment term of one to five years. When your loan is spread over a longer period, your payments will be lower. But more payments mean more interest charges, so the total amount you will pay can be much higher than what you would pay with a shorter loan term.

On the other hand, when your repayment period is shorter, your monthly payment will be higher in order to repay the loan more quickly. But you won’t pay as much interest, which means your loan is usually cheaper with a shorter loan term than a longer one.

Visit Credible at compare personal loan rates for your motorcycle purchase.

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