Motorcycles are a popular mode of transportation, and many people choose to finance their motorcycles through motorcycle loans. If you’re in the market for a motorcycle loan, there are some things you need to know.
In this article, we’ll discuss the different types of motorcycle loans available. We’ll also discuss how to qualify for a motorcycle loan, and what to expect once you’ve been approved.
What Is a Motorcycle Loan and How Does It Work?
A motorcycle loan allows you to spread the cost of a motorcycle over a period of time. These usually last 2 to 5 years. Motorcycle loans are available from a number of different lenders.
- Banks: Many banks offer motorcycle loans to their customers. If you already have a checking or savings bank account, you may be able to apply for a loan through whichever financial institution you belong to.
- Credit Unions: Credit unions are another option when it comes to getting a loan for your motorcycle. Unlike banks, credit unions are owned and run by their members – so they may offer low rates.
- Online Lenders: There are also a number of online lenders that offer motorcycle loans. These lenders may be able to offer you a loan with more flexible terms than traditional banks or credit unions.
Compared to car loans, motorcycle loans usually have higher interest rates and shorter loan terms. This is because lenders consider motorcycles a higher risk investment.
Recreational vehicles also consist of another type of loan that you can use to finance a motorcycle. However, these loans usually have even higher interest rates than motorcycle loans.
The Different Types of Motorcycle Loans Available
There are a couple of different types of motorcycle loans available. These can depend on the motorcycle price, the model year, and your needs. The two main types of motorcycle loans are secured and unsecured.
Secured Loans
A secured motorcycle loan requires that you put down some form of collateral, such as a car or a house. This type of loan is generally easier to obtain. This is because your lender has a safety net in the event that you default on the loan.
Unsecured Loans
An unsecured personal loan is a loan that doesn’t require you to put down any collateral. Unsecured loans are riskier for the lender, which is why it often has higher interest rates and monthly payments. However, this type of loan does not require that you put down any collateral. This may be a good option if you do not own a home or another asset that can be used as collateral.
If you’re in the market for a motorcycle loan, it’s important to understand how these loans work and what to expect if you get approved.
How to Qualify for a Motorcycle Loan
In order to qualify for a motorcycle loan, you’ll need to have a good credit score. The lender will also consider your monthly income and monthly expenses. In general, it’s best to apply for a motorcycle loan if your monthly income is 2-3 times greater than your monthly expenses.
If you’re looking to finance a new bike, it’s likely that you’ll need to have some cash available up front in order to make a down payment. Many lenders require a down payment of 10-20% of the total cost of the bike.
When deciding whether or not to approve your loan application, lenders will take several factors into consideration. These factors will include personal information such as:
- Credit Score: Your credit score will be a key factor in whether or not you’ll be approved. Most lenders require a minimum credit score of 650 in order to qualify for a loan. Excellent credit scores (750+) will generally get you the best interest rates. A poor credit score (600 or below) may result in your loan application being denied.
- Monthly Income: To qualify for a loan, you’ll need to have a monthly income that is 2-3 times greater than your monthly expenses. Your monthly income will be verified by the lender through pay stubs or tax returns.
- Monthly Expenses: When determining whether you can afford a motorcycle loan, lenders will take a look at your monthly expenses. This includes things like your rent or mortgage payment, car payment, credit card payments, and any other monthly debts that you may have.
- Down Payment: Many lenders require a down payment of 10-20% of the total cost of the bike. If you can put down a larger down payment, you may qualify for great rates or monthly payments.
What to Expect Once You’ve Been Approved for a Motorcycle Loan
Following approval for a motorcycle loan, you’ll likely have several different payment options to choose from. Some lenders will allow you to pay off the loan early without penalty. Others may charge you a fee for doing so.
Other factors that lenders may take into consideration when approving your loan application include:
- Your employment history: Most lenders will want to see that you have a steady job and income.
- The type of motorcycle you’re looking to finance: Some lenders may have restrictions on the type of motorcycle you’re able to finance.
- Your monthly income and expenses: As mentioned above, monthly income and monthly expenses will be taken into consideration when determining whether or not you can afford a motorcycle loan.
- Your credit history: Your credit history will have a major impact on your monthly loan payment and interest rate. If you have good credit, you may qualify for lower monthly payments or low-interest rates.
- The size of your down payment: The size of your down payment will also be taken into consideration when approving your loan application. A larger down payment may mean lower monthly payments or a better interest rate.
- Your debt-to-income ratio: Lenders will also look at your debt-to-income ratio when determining whether or not you can afford a motorcycle loan. This ratio comes from dividing your monthly expenses by your monthly income. A ratio of less than 50% is good. On the other hand, a ratio of more than 50% is poor.
The lender will determine your monthly payments which will be based on the interest rate and monthly principal payment. In general, monthly payments on a new motorcycle loan will be higher than monthly payments for other types of loans, since the total cost of the bike is typically higher.
How to Shop for the Best Motorcycle Loan Rates
One of the best ways to get a great motorcycle loan rate is by comparing offers from different lenders.
Most major banks and credit unions will offer motorcycle loans. It would be smart to compare offers from multiple lenders to see who has the best rates. Also, check with online lenders, as they may have the lowest rates due to smaller overhead costs.
You can start by checking with major banks and credit unions in your area. You may also consider online lenders who typically have lower interest rates due to smaller overhead costs.
To ensure that you’re getting the best rate possible, it’s important to do your research and carefully compare offers from different lenders. Additionally, be sure to read the fine print in your loan agreement so you know exactly what fees and penalties may apply.
Things to Consider Before Taking Out a Motorcycle Loan
Before taking out a motorcycle loan, it’s important to carefully consider your monthly income and expenses. This will help you to determine whether or not you can afford monthly payments on the loan.
Additionally, be sure that you have enough money saved up for a down payment, as this will usually result in lower monthly payments or a better interest rate. It’s also important to be aware of the fees and penalties that may apply if you decide to pay off the loan early, as this could end up costing you more in the long run.
When you’re ready to apply for a motorcycle loan, be sure to compare offers from multiple lenders to ensure that you’re getting the best interest rate possible.
Fees and Penalties
When taking out a motorcycle loan, it’s important to be aware of the fees and penalties that may apply.
Most lenders will charge an origination fee, which is typically 1-2% of the total loan amount. Additionally, there may be other fees associated with the loan, such as prepayment penalties or late payment fees.
Be sure to read the fine print in your loan agreement so you know exactly what fees and penalties may apply. This will help you to avoid any surprises down the road.
Typical Loan Terms for Motorcycle Loans
The typical repayment term for a motorcycle loan is three to five years. The annual percentage rate (APR) on motorcycle loans is typically higher than the APR for other types of loans, such as an auto loan.
The size of your down payment will also affect your monthly payments and interest rate. In general, a larger down payment will result in lower monthly payments or a better interest rate.
The interest rate on your loan will depend on your credit history, the size of your down payment, and the length of the loan. In general, the longer the loan term, the higher the interest rate will be.
It’s important to carefully consider the terms of your loan before signing any agreements. Be sure that you can afford the monthly payments, and be aware of any fees or penalties that may apply if you decide to pay off the loan early.
Key Takeaway
If you’re looking for a new or used motorcycle, and need financing to help cover the costs, a motorcycle loan may be the right option for you. You can use these personal loans to cover the cost of your bike, as well as any associated fees or taxes.
The minimum loan amount is typically $5,000, and the maximum loan amount is usually $25,000. The interest rate on motorcycle loans is typically higher than the interest rate on other types of loans, such as auto loans.
To qualify for a motorcycle loan, you’ll typically need good credit and a stable monthly income. Your monthly payments will be based on the interest rate, the size of your down payment, and the term of the loan.
There are a variety of lenders offering motorcycle loans, including banks, credit unions, and online lenders. To get the best deal on your motorcycle loan, it’s important to compare interest rates, monthly payments, and terms from multiple lenders before deciding on a loan.
Good luck hitting the open road in your new bike!