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If you’re longing to feel the wind in your face while you’re roaring down the open road, buying a motorcycle might be on your mind — and that could mean shopping for a motorcycle loan.
Many lenders offer financing for motorcycles, so you’ll want to compare interest rates and loan terms to get the best deal for you. Even if you’ve financed a car purchase, you’ll find parts of the motorcycle-buying process to be unique. Understanding what to look for will come in handy.
Before you head to the dealer, examine your budget and decide if you need a loan at all. Paying cash may be your best option if you can make it work financially.
What is a motorcycle loan?
Motorcycle loans are often secured loans, meaning you must back them up with collateral — in this case, the collateral is usually the motorcycle itself. When you get a secured loan, your property can be repossessed by the lender if you fail to make your payments.
If you’re concerned about using your motorcycle as collateral against your loan, you may consider applying for an unsecured personal loan. But be aware that unsecured personal loans can be viewed as a greater risk by lenders since they can’t take your property if you fail to meet the terms of the loan. This is why unsecured loans typically come with higher interest rates and may require higher credit scores for approval.
Motorcycle loan types
If you shop around for motorcycle financing, you may notice that lenders usually classify motorcycle loans and auto loans differently. Some lenders may charge higher interest rates for motorcycle loans than they might for an auto loan.
Some lenders break motorcycle loan types into more detailed categories, with options for new versus used bikes and specifications about what is and isn’t considered a motorcycle. Certain lenders won’t offer financing for a dirt bike, scooter or ATV. Others may not even finance motorcycles at all.
Disclosures you may not get with a used motorcycle
The Federal Trade Commission requires used-car dealers to post Buyers Guides for your review before you purchase an automobile. But this requirement doesn’t apply to motorcycles. Here are the disclosures you won’t necessarily get for a used motorcycle without a Buyers Guide.
∙ Information about the bike’s mechanical and electrical systems
∙ Major issues to look out for
∙ How to get a vehicle history report
∙ Whether the motorcycle is under warranty, and if so, which type and what the warranty includes
Just because the dealer isn’t required to provide this information upfront, doesn’t mean you can’t ask for the details. Be sure to request the info before you purchase a motorcycle. The FTC also advises that you get oral promises and agreements put in writing.
Where can I get a motorcycle loan?
You can shop for your motorcycle loan online or in person. Getting started is as simple as asking for quotes and comparing financing options.
Getting a motorcycle loan from a bank, credit union or online lender
When you apply for a motorcycle loan through a traditional lender like a credit union or bank, you can often apply for preapproval. Just like an auto loan, your motorcycle loan preapproval will likely include a quote on loan terms like an estimated interest rate and the amount you may be able to borrow. Traditional lenders can also offer unsecured personal loans, if you decide to go that route.
Your preapproval can help guide your shopping experience. It’ll give you an idea of how much financing may be available and you can look for the best deal for you within that price range. Just remember: Preapproval doesn’t guarantee you’ll get the loan — you still have to apply and get approved, and then the terms of your loan may also differ from the estimates provided in the preapproval.
Loan preapproval may affect your credit scores — it depends on if the lender uses a hard or soft inquiry. When many lenders preapprove you for a loan, they’ll perform a soft inquiry on your credit, which doesn’t hurt your credit scores. If you choose to apply for the loan you’ve been preapproved for, the lender will usually perform a hard inquiry, which may cost you a few points off your credit scores.
Getting a loan from a dealership
You may decide to arrange financing through a dealership instead of going on your own to a bank. Some motorcycle dealers will submit your loan application to lenders on your behalf to help you secure financing.
While going through a dealership may seem more convenient than finding your own loan, it usually costs more since dealers often add fees to the lender’s quote. It can also stop you from comparison shopping at other locations.
Some dealerships offer a less favorable option: in-house financing. In-house financing, provided directly through the dealer, is often aggressively marketed to buyers with poor credit. While this option might appeal to you if your credit isn’t in great shape, loans financed in-house — also known as “buy-here, pay-here” loans — tend to come with much higher interest rates, meaning the overall cost of borrowing will likely be greater.
Getting a loan from a manufacturer
Some motorcycle manufacturers offer loans online. Harley-Davidson, for example, offers the opportunity to apply for a loan online. BMW also offers the opportunity to apply for motorcycle financing directly through its dealerships.
Tips for getting a motorcycle loan
While your motorcycle loan may not be as big as an auto loan, the terms of your loan still matter. Whether you’re borrowing $3,000 or $30,000, starting with a bit of research and preparation can help you find a loan that works for you.
Review your credit
Your creditworthiness can affect the terms you qualify for, including your interest rate and monthly payment. If you’re thinking about applying for a motorcycle loan, check your credit scores to see if there’s an opportunity to improve your scores and possibly get a better interest rate.
Determine what you can afford
Before you fall in love with a new motorcycle, figure out what you can afford to pay. Here’s a good rule of thumb to consider: Your auto payments shouldn’t exceed 15% of your monthly net income. Ultimately, affordability depends on the details of your personal budget.
Making comparisons throughout the shopping process may help you find not only the lowest sale price on a motorcycle, but also the best deal on a loan. The difference between 5% and 6% interest rates may not seem like a lot. But over the course of a four-year repayment on a $15,000 loan, getting a 5% interest rate, instead of 6%, could mean saving hundreds of dollars in interest.
Here are some other figures to look for, compare and even negotiate.
- Total dollar amount you’re borrowing
- Monthly payment amount
- The interest rate
- Total finance charges (interest plus fees)
- Additional fees, like a late-payment or pre-payment penalty
Make sure to check the total annual percentage rate, or APR, since it should include your interest rate and certain fees in your loan agreement, like an application or origination fee.
Finding a good motorcycle loan for you can involve a bit of work. There’s no one-size-fits-all financing method for your new bike, but if you’re willing to research the market, compare estimated interest rates and calculate how much new debt you can afford to take on, you’ll be in a better position to make a deal that’s best for you.