Everything You Need to Know About Motorcycle Loans and Financing

FT Contributor  | 

If you plan to purchase a motorcycle, you may need to finance your purchase. If you can’t pay outright for the entire purchase price for the bike, you can finance the balance with a motorcycle loan through a financial institution. This type of loan is similar to one you would obtain when buying a car. The lender sets loan terms, such as the interest rate, loan amount, and loan duration.

When you apply for a car loan, the financial institution also sets certain qualifications that determine if you’re eligible for a loan and the terms offered to you. You’re required to agree to a credit check to show you qualify for a car loan.

The application process for a motorcycle loan is similar to a car loan so be prepared for a credit check. It’s important to understand the loan qualifications for most motorcycle loans, what to look for in a loan, and where to obtain a motorcycle loan when you buy a new bike.

Choosing a Loan

When you bought your first car, you probably shopped around your car loan to different lenders and you should consider doing the same for your motorcycle purchase. The motorcycle dealer, manufacturer, and financial institutions may provide motorcycle loans so it’s important to shop your loan around.

When you apply for a motorcycle loan, the lender checks your credit score. If you carry a lot of debt, your score may be low, which may cause you not to qualify for the loan. If you do qualify with a low credit score, the loan terms may be unsatisfactory, including the:

  • Loan amount: With a low credit score, the lender may not be willing to provide you with a high loan amount. You may need to put down more money or purchase a motorcycle that’s less expensive.
  • Loan term: When you have a low credit score, you may face a longer loan term. You’ll be responsible for paying off the loan for a longer period of time.
  • Annual percentage rate (APR): The APR is the interest rate you’re required to pay in addition to the loan amount. If your credit score is low, lenders are more likely to offer you a loan with a high APR.

Before agreeing to a motorcycle loan, shop it around to different lenders that offer these loans and compare the terms. Choose the loan that offers the best rate and consider the monthly payment you’re responsible for.

When you agree to a loan, your motorcycle is usually used as collateral for the loan. You’re responsible for making payments until the loan balance is satisfied. If you stop making payments, the lender can take over ownership of the motorcycle.

How to Qualify

Most dealerships and manufacturers offer motorcycle loans, as do certain credit unions, banks, and online lenders. When you apply for a motorcycle loan, the qualifications you must meet depend on the lender, but in most cases, you’ll need:

  • Proof of income, such as paycheck stubs.
  • A certain credit score, which also affects the loan terms you’re offered.
  • A down payment, which depends on the loan amount you’re offered.
  • Proof that you obtained motorcycle insurance.

When you buy and finance a car, the lender generally wants to see proof of car insurance and the same is true with a motorcycle loan. You’ll be required to show you have adequate insurance on the bike so the lender knows their collateral is protected.

If your credit score is low or you don’t have sufficient proof of income, it may be best to wait until these circumstances change or you can buy the motorcycle with cash. It can be hard to qualify for a car loan on minimum wage that offers good terms and it’s generally the same way with a motorcycle loan. If you qualify for a loan, the loan terms may include a high interest rate, down payment, and monthly payment.

What to Avoid

To preserve your financial stability, it’s important to know what to avoid when financing a motorcycle. In most cases, motorcycle loans are associated with higher interest rates than car loans so consider paying cash for your purchase if possible.

Before you agree to a motorcycle loan, you should:

  • Shop the loan around to different lenders and compare loan terms.
  • Analyze the costs of the loan, including the interest rate, and make sure you won’t be upside down on your car loan.
  • Never put your motorcycle purchase on your credit card since it usually has a high interest rate and severe penalties for skipping payments.
  • Never consider offering additional collateral for the loan, such as your home or another vehicle.

While it’s tempting to agree to any loan terms so you can purchase your motorcycle, it’s important to ensure you understand your financial responsibilities with the loan first. Review the interest rate, loan duration, and monthly payment to ensure you can afford it before agreeing to terms.

Determine Your Budget Ahead of Time

Before you start shopping for a motorcycle, know your budget and commit to sticking with it. You may have had to wait and save money for a car before you made a vehicle purchase. With a motorcycle, it’s also important to have money set aside for other expenses, such as:

  • The down payment.
  • Registration fees.
  • Document fees
  • Taxes.
  • Insurance.

When figuring out how much you can afford to spend on a motorcycle, realistically consider your income and expenses. While the interest rate and monthly payment for the motorcycle loan are important, also consider the maintenance fees you’ll need to pay for your investment. Ensure you feel financially comfortable with these added expenses in your budget before making the purchase.

If you’re in the market for a motorcycle but don’t have cash for the full purchase price, you’ll need to apply for a loan. Before agreeing to loan terms, consider the interest rate and monthly payment you’re responsible for. It’s important to ensure you have room in your budget for a motorcycle loan payment before you buy a bike.


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