Like many people, you dream about coasting down the open road on a sleek new motorcycle. You crave the feeling of freedom that only riding a motorcycle can provide. You want to buy a motorcycle, but you don’t have the extra money in your account right now.
One solution to your situation is to get the right financing to turn your dream into reality. There are many ways to get a loan for a motorcycle, from bank and credit union loans to loans from the manufacturer, to dealership loans. You’ll want to know all the ins and outs of these loans before you decide which route to go.
What is a Motorcycle Loan?
As the name implies, a motorcycle loan is a loan taken out to buy a motorcycle. Many motorcycles cost under $5,000, with only a few that cost as much as a brand new car. Because motorcycles cost much less than other automobiles, financial institutions are more apt to lend money to trustworthy borrowers.
However, motorcycle loans can be considered risky by banks and credit unions. They carry a significantly higher risk of damage to the loan collateral itself, the motorcycle. This affects the rates and terms of motorcycle loans in some cases. Motorcycles are also considered recreational vehicles, which means they aren’t a necessity. They also wear down faster, causing lower overall value more quickly than cars or trucks.
To cut down on their risks, lenders sometimes tack on higher interest rates and credit qualifications to motorcycle loans. This may seem intimidating; however, there are many options when it comes to ways to get a motorcycle loan.
Motorcycle Manufacturer Loans
One option for a motorcycle loan is to get one straight from the manufacturer. Big-name motorcycle makers have begun financing customers themselves. Those with higher credit scores can qualify for special loan offers with low APR rates. As part of the buying process, shop around for the best loan terms and rates, so check with the manufacturer to see if they have financing for customers or offer any special deals on their loans.
Dealership Loans
Dealership loans are probably the most common method of financing your motorcycle. There are several factors to consider when thinking about filling out a loan application through a dealership.
Third-party involvement
First, consider that the dealership is most likely offering a loan through a third-party lender. This lender may offer an interest rate; however, the dealership is under no obligation to pass this rate on to you. They may give you a higher rate, so they make money. Dealerships offer financing to people with poor credit because it allows them to make more money.
Dealership kickbacks
Dealerships have partnerships with specific third-party companies. You can be sure that these relationships favor the dealer and lender, not the customer. When you finance through a dealership, you are at the mercy of what they offer, and while those with bad credit may have few choices, it is something to keep in mind when shopping around.
Convenience
One benefit to dealership motorcycle loans is the convenience they offer. You simply pick out your vehicle, give them your information, accept their offer, sign, and drive away. This is extremely convenient and cuts down on the effort it may take to find financing through other methods.
Credit Unions, Banks, and Online Lenders
Another way to get financing for a motorcycle is to go through a traditional financial institution. Typically these lenders can offer personal loans or auto loans to fund your motorcycle purchase.
Credit unions generally have preferable rates and can be more lenient during the application process. They may also approve unsecured loans with fewer restrictions. The downside is that some credit unions require a membership to the organization, so if you don’t already belong, you’ll have to go through that process first.
Banks are another good choice to apply for a loan for your motorcycle. Banks often prefer to work with existing customers, so this can work to your advantage if your bank offers loans. You can apply for an unsecured personal loan, an auto loan, or a motorcycle loan if they differentiate it as an option.
Online lenders are typically able to offer the best of what banks and credit unions can offer. These institutions generally have lower interest rates on their loans and work with you on affordable monthly payments.
Personal Loans Versus Auto Loans
One thing to keep in mind is that there are differences between personal loans and auto loans.
Personal loans
Personal loans are structured loans that can be taken out for different purposes. Some personal loans are unsecured, while others require collateral before approval. Generally, as long as you are approved and follow the repayment plan, the bank doesn’t care what you use the money for. You may need to have a credit score at least in the upper 600s to be approved for a personal loan.
Car loans
Auto loans are loans specifically for vehicle purchases. Auto loans use the vehicle as collateral. You won’t own your motorcycle with an auto loan until you pay off the loan, much like you don’t own your house until you pay your mortgage. Auto loans are usually relatively easy to get approved for and can have decent interest rates. However, they may have prepayment penalties built into the terms. This means that you cannot pay off the loan early without a fee, which keeps you tied into the payments for the length of the contract.
Motorcycle Loan Approval
As you consider the different ways to get a motorcycle loan, it is also a good idea to think about your credit history and what a potential lender will be looking for to approve you for the loan. Lenders will not only look at you, however, but they will also be considering the motorcycle you wish to purchase.
Credit score and credit history
Anytime you apply for a loan, the lender looks at your credit score and credit history. They are looking to see if you are a trustworthy borrower. A mediocre credit score can affect your interest rates and approval amount. Ensure that your credit is in good shape before applying for a loan, or expect that you may be refused financing or be subject to higher fees and interest.
Down payment offer
Financial lenders will also consider whether you are offering to put a down payment on the motorcycle. Although many places will approve you without a down payment, offering one is in your best interest. It cuts down on the loan amount and shows you have enough money to put something toward the purchase.
Motorcycle: new or used
The lender will want to know some stats about the motorcycle you wish to purchase. A new bike will cost more but will require less maintenance. A used vehicle may cost less upfront but is potentially riskier because it may have unforeseen safety issues.
Price and value
A financial institution will also base its loan decision on the price of the motorcycle versus its value. If the motorcycle price is high, but its actual value is low, they may not want to finance the purchase. However, if the motorcycle is worth the seller’s asking price, the lender probably won’t have a problem issuing a loan based on this factor.
Apply for a Motorcycle Loan Today
If you are ready to buy your motorcycle and get cruising, you can apply with T&I Credit Union. They have special terms for motorcycle loans and auto loans. Call (248) 397-9456 to find out T&I Credit Union’s terms and rates on motorcycle loans today.
