Got Bad Credit? Here Are Your Financing Options For Motorcycle Loans

Kevin Shiuan
August 10, 2020

Though you might imagine the freedom of riding around on a motorcycle, the need for financing may feel like a ball and chain. Many people can’t buy motorcycles outright given that they are likely paying for a regular car as their daily vehicle, so hunting for the best deal on a motorcycle loan is important.

First, what is good and poor credit?

It’s completely up to the individual lender to determine their acceptable level of risk, so there is no such thing as a de facto “good” or “bad” credit score. Typically, any credit score above 690 is considered good credit while subprime if below, but credit approval will depend on the lender. Some lenders may even have a minimum credit score such as 650 or you won't be able to borrow from them. You are more likely to be approved at that level for credit or loan products, but the lower your score is, the worse the loan terms are for you like higher interest rates.

Even though the average US FICO score hit a new high of 704 in 2018, many Americans fall into hard times which could negatively impact their credit scores. In addition, some people have no credit at all. The main cause of bad credit is the consistent inability to pay the money back on time. Accidents happen. However, ‘bad credit’ is the main reason you may be turned away from buying a car and can’t get loan approval when you might need it the most. Know your credit situation and get a copy of your credit report before applying for a loan.

What is a motorcycle bike loan?

Motorcycle loans are very similar to an auto loan. If you want to get a motorcycle or car but you don't have enough money at the moment, a loan can give you the money you need. You put a downpayment on your car or motorcycle and can receive a loan to help buy the rest of it. Both of these are secured loans in which the vehicle itself is used as collateral to secure against the loan. With this form of motorcycle financing, you are able to have the bike now and start paying off the motorcycle afterwards. This can be a huge benefit if you are in desperate need of some new wheels but don't have the cash to buy it upfront at the moment. However, the main difference between these two is that you will see lenders consider motorcycle loans and auto loans separately.

Riding a motorcycle is far riskier and dangerous versus driving a car. In 2018, motorcyclists were 28 times more likely to have a fatal accident per mile traveled. Because of this, lenders take this risk into consideration when they are drafting up your motorcycle loan. This means that lenders will often charge you more interest per monthly payment. Even if a car and motorcycle are the same price, you will probably end up paying more money on your motorcycle loan than your car loan.

Where can you get a motorcycle loan?

Banks

Your bank is a convenient place to apply for financing since you already have a checking account with them. You can request to get a loan from your bank for many things, including your motorcycle. Motorcycle financing with your bank may get you discounts from the bank or other benefits. They typically will have all of the customer service and mobile apps that you are familiar with to manage your loans. Banks tend to be one of the more common places to get loans, but it is not your only option.

Credit Unions

You may be able to get the best rate on your motorcycle loan through your loan credit union. They also may have fewer fees that a bank may charge. However, you must join a Credit Union, which means there are membership requirements. These requirements can span from having a checking account to making one-time charitable donations to working for a specific employer.

Online Lenders

There are plenty of online lenders to shop through to get the best deal for an auto loan. Since they don’t have to operate physical locations, they typically have the lowest loan rates and you can apply from the comfort of your home. Many of the lenders allow you to get your money in a short amount of time, so the speed and ease of an online lender might be the right fit for you. These might be your best bet, but always make sure to compare rates before making a decision on your financing.

Dealerships

The easiest place to get a motorcycle loan is through the dealership. Lenders work with dealerships to provide loans to those looking to purchase a motorcycle from the dealer. For your convenience, you can purchase your motorcycle and get financing all in the same day. Be aware that dealerships will charge a higher interest rate than lenders would charge a customer directly. The lender gets to pocket the markup as their own profit. It’s highly recommended that you do some research into other financing options first before taking dealership financing. Weigh all of your options and shop for other loans from other places to make sure you are getting the best deal you can.

Motorcycle Manufacturers

All manufacturers provide their own financing offered through dealerships or directly to the consumer. Generally, manufacturers run seasonal deals for those that have high credit as are often seen in advertisements. As an example, for March 2020, Harley-Davidson is offering APRs as low as 2.99% with 0$ down on select models. Since many of these deals are for high credit customers, if you are on the lower end of the credit score, this might not be the option for you.

Personal Loan

If you can’t find motorcycle financing anywhere else, a personal loan like an installment loan can be used for inexpensive purchases. With these, you make manageable, monthly payments with interest until the loan is paid off. These personal loans can also be available for those with poor credit. However, these loans will carry a much higher APR than a motorcycle loan as a result. Likewise, the loan terms of some personal loans can be very expensive and may even be difficult for you to pay off. Shop for the best loan terms and APR's from personal loan lenders. Consider all your other options first!

It's not hard to build your credit history.

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Manufacturer coronavirus response

Given the current economic impact of COVID-19, many manufacturers have responded to deal with falling motorcycle sales and potential increase in motorcycle loan defaults. Specifically, they’ve created programs to support those that have lost or are at risk of losing their paychecks.

For example, Honda is providing payment extensions, deferrals, and late fee waivers. They are also providing purchasing programs like cash towards a new vehicle and special APRs for pre-owned vehicles. More manufacturers will likely be instituting new programs as a response to the coronavirus. Make sure to check with your manufacturer lending arms for more information.

How to choose financing for your motorcycle with bad credit

You may have fallen on hard times which negatively affected your credit score. Because you are considered a riskier customer to a lender with a low credit score, lenders will already be looking to charge high APRs. Make sure you shop around for the lowest interest rate and the fewest fees if you really need to buy a motorcycle. As mentioned above, a motorcycle loan is going to be your best option versus something like a personal loan.

There are many online lenders that specifically cater to people with bad credit that want to purchase and finance a motorcycle. MotorcycleLender is one company that offers unsecured fixed rate personal loan options with interest rates with a minimum of 6.99%; the APR can be as high as 20% or more for those with poor credit.

You may not want to pay the high interest rates with bad credit. Here are some options that you can explore if you really need to purchase the motorcycle:

  • Cash - Paying with cash is the easiest way to avoid financing interest and fees altogether. Make sure you shop for cheaper used alternatives versus a brand new bike. Decent used motorcycles can range from $4,000 to $10,000, so be ready to spend that money.
  • Co-signer - It is possible to have someone with good credit co-sign with you. They will be fully responsible for the debt if you don’t pay the loan back. Their credit score is also affected if you don’t pay your loan on time.
  • Build your credit first - We go through some options for building your credit below.

Building your credit

Luckily, it doesn’t take a long time to build or rebuild your credit. You may improve your credit in the following ways:

  • Become an authorized user on a credit card: Have a credit cardholder add you to their account as an authorized user. Authorized users are not legally required to pay the bill, but you can still get the benefits of being an authorized user even if you don’t spend any money on the card.
  • Get a secured credit card: A secured credit card works just like a normal credit card, but you will typically be required to put a downpayment that is equal to the credit limit to secure the credit card.
  • Apply for a Possible Finance loan: Possible Finance provides customers with a short term loan, and we report on-time monthly payments to all three credit bureaus. Many of our customers take out small-dollar loans specifically to build or rebuild their credit.
  • Get a credit-builder loan: Some credit unions and financial institutions offer a credit builder loan. They will lend you money and deposit it in a bank account you can’t touch. Over time, you repay the loan and once it’s fully paid, you can access the money in the bank account.

It is advisable that you build your credit before taking on any sort of financing whether it be for a motorcycle bike or a car. Consider the high costs of having a bad credit score and weigh them against owning a motorcycle. You may find that you can hold off just a little bit longer before you’re on the road with the wind blowing through your hair.

Kevin Shiuan

Kevin is a Product person at Possible and is passionate about personal finances among other things. He believes that the more we talk about money, the less we are afraid of it. Also, his main hobbies include breakfast, lunch, and dinner.

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