Bad Credit Motorcycle Loans
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There’s more to buying a motorcycle than just choosing which model you like best. You’ll need to decide whether to buy a used or new motorcycle, pick out and pay for safety gear, get insurance and set up your budget to cover ongoing maintenance costs.
Even if your credit isn’t in great shape, there are a lot of options when it comes to financing your purchase. Bad-credit motorcycle loans and unsecured personal loans cost more, but they are widely available from banks, credit unions and online lenders.
If your credit has taken a few hits recently as a result of late payments, accounts that went to collections, or even if your credit file is just too thin for a conventional motorcycle loan, you could still get financing.
- What to consider before financing a motorcycle when you have bad credit
- Where do you find a motorcycle loan when you have bad credit?
- How do you decide on your best way to finance a motorcycle when you have bad credit?
What to consider before financing a motorcycle when you have bad credit
Motorcycle ownership has some important associated costs, beyond the price of the bike. While financing your purchase is crucial, it’s also important to consider costs, such as maintenance, safety gear, insurance premiums and gasoline.
A bad-credit motorcycle loan will cost more than a traditional motorcycle loan, too. Here’s what to watch for:
Additional costs of owning a motorcycle
While motorcycles are generally less expensive than cars, you can plan to spend about $1,000 each year on routine maintenance compared with an average of $849 per year for car owners. This includes $400-$700 for a pair of good tires. The rear tire must be replaced about every 3,000 miles for safety reasons. Your costs may be higher or lower, depending on the number of miles you drive each year.
“Motorcycles are advanced machines that require regular maintenance,” said Chris Riley, founder of AutoWise.com and avid motorcyclist. “Chains stretch, tires degrade, cables need replacing and fluids need topping up. The cost of maintenance can often come as a surprise for new motorcyclists.”
The other expense that motorcyclists often don’t factor into their budgets when they buy their first bike is safety equipment. According to Riley, it’s important to invest in the right kind of safety products. “Most people underestimate the cost of good motorcycle gear,” he said. “Many riders are happy to spend thousands on a motorcycle but like to go for the cheapest option when it comes to protective gear. Good gear goes a long way.”
Check your local laws about wearing a helmet, and look for one that’s compliant with Department of Transportation (DOT) or Economic Commission for Europe (ECE) guidelines. Kevlar-reinforced and leather gear will help protect you in an accident, but they are also a good barrier between a rider and road debris, bugs, wind, rain and dust. Most states — 28 — have laws covering at least some riders, according to the Insurance Institute for Highway Safety. Three do not have any helmet requirements.
In many areas of the country, motorcycle insurance is mandatory. Expect to spend an average of $519 per year, according to ValuePenguin, depending on your zip code and driving record. (Note: LendingTree owns ValuePenguin.) A good policy will cover the bike, accidental damage to other people’s property while riding, theft, medical bills and vandalism. You may also be required to obtain a special license to operate a motorcycle or have an endorsement on your regular driver’s license, depending on your state’s laws. Some states may require you to pass a road test or take a motorcycle safety course. Course fees vary, but some manufacturers offer incentives.
Even though motorcycles are gas-sippers not guzzlers, you’ll still have to fuel up regularly. Riley says the average bike gets 55 miles per gallon, and the average rider travels about 4,500 miles per year. Government figures put those estimates a bit lower: 44 mpg and an average of 2,423 miles per year. Riley estimates you should leave $250-$300 per year in your budget for gas, considerably less than the roughly $2,000 spent by the average U.S. household annually, according to the U.S. Bureau of Labor Statistics.
Bad-credit motorcycle loan costs
The information in your credit report helps lenders decide the interest rate they’ll charge on a motorcycle loan. Your credit score is calculated using the information in your credit file. For this reason, it’s crucial that you know what’s in all three of your credit files. You can get one copy of each report from TransUnion, Equifax and Experian at www.annualcreditreport.com.
FICO credit scores range from 300 to 850. Lower credit scores indicate that you pose a larger statistical risk of defaulting on your loan. A poor credit score is generally considered 580 or below. Here’s some information on how to improve your credit.
When preparing to buy a motorcycle, it can be helpful to go through the pre-qualification process with your bank, credit union or online lender. Typically, lenders look at your credit file. You’ll have to go through the formal application process, which includes allowing access to your credit file in what’s known as a “hard pull” of your credit, to get access to the money you need to buy your motorcycle, if the lender didn’t require that during the pre-qualification process.
A hard pull of your credit may result in your credit score dropping a few points. If you plan to shop around for your best rate, do so within a 30-day window so the FICO scoring model will group your inquiries together as one, minimizing the negative impact to your credit score. Note: some older FICO scoring models give you a 14-day window to shop around. The newest FICO scoring models offer a 45-day window.
Where do you find a motorcycle loan when you have bad credit?
Compare offers from a number of lenders, even if your credit score is in the lower tiers. You could fill out a single form at LendingTree and receive uplendingclub to five offers from lenders, depending on your creditworthiness. Use a motorcycle loan calculator to help you compare loan offers to make sure you choose your best possible deal.
Online lenders offer an easy application process that can be completed without an in-person visit to a bank. Many online lenders offer very competitive rates, but you may be able to find a better offer with a bank or credit union if you already have an established relationship or are willing to open an account.
Westlake Financial works with borrowers from all credit tiers and offers motorcycle loans through its subsidiary, LoanCenter. The catch is that Westlake offers financing through a network of dealerships, so you won’t know your exact rates or terms until you complete the application process there.
If you are already a member of a credit union, you should start your search for a motorcycle loan there, no matter your credit situation. They may not advertise as heavily as some banks, but credit unions typically don’t have the same overhead costs; and, since credit unions are nonprofits, they may be able to offer lower interest rates and be more willing to work with those with poor credit.
You’ll have to be a member of the credit union to get a motorcycle loan there. You may also have to open a savings account and maintain a small balance to hang on to your membership. Some credit unions have locations in several states, such as Navy Federal Credit Union, others are smaller and may not offer loans where you live.
FedEx Employees Credit Association
Membership at FedEx Employees Credit Association is open to FedEx employees and their immediate family members. It offers motorcycle loans for people with credit challenges, but it considers applicants on a case-by-case basis, focusing on the individual and their specific financial situation. If approved, FedEx Employees Credit Association will finance motorcycle loans for 90% of the purchase price for members, if the bike is four years old or newer.
Not all banks will work with borrowers who have past credit problems. If you use a traditional bank for your day-to-day finances, ask whether it offers motorcycle loans. A successful track record there may help you get the loan you need.
If you qualify for a loan through a bank, you may be eligible for APR discounts if you agree to automatic withdrawal from your account as a payment method.
Wells Fargo offers new and used motorcycle loans and doesn’t charge origination fees or prepayment penalties. The bank doesn’t have a set minimum credit score for this type of financing, but you’ll have to show that you have steady employment and an income that can cover the payments easily.
If your credit score is below 620, you’ll pay as much as 18.98%* APR. This example rate is based on a $10,000 loan originating in Charlotte, North Carolina, with a repayment term of 24 months, at the time of publication. Current Wells Fargo customers with a checking account can get rate discounts when they authorize automatic payments for their motorcycle loans.
At Ameris Bank, a personal banker will help you through the application process at a local branch. You’ll need to bring in your driver’s license, recent pay stubs and information about the motorcycle you want to buy. The banker will call you in less than one business day to let you know if you are approved.
Ameris Bank doesn’t charge prepayment penalties, and it doesn’t set a minimum credit score; however, having a good source of income and demonstrating that you are working on your credit will help you get approved. Also, having a down payment and/or a cosigner will work to your advantage. In fact, a significant down payment may be required.
Ameris Bank has branches in several states in the southeastern U.S.
If you time your purchase right and are able to improve your credit score to top-tier status, you could ride away from a Harley-Davidson dealership on a brand new bike with a 3.49%* APR and up to a 60-month term after completing Harley’s Riding Academy. That offer, through Eaglemark Savings Bank, a division of Harley-Davidson Financial Services Inc., is only for people with credit scores in the highest tiers; and, in fact, Eaglemark doesn’t work with bad-credit customers. However, getting your credit in good shape before you apply could make you eligible for this offer.
Yamaha, another popular motorcycle brand, also has manufacturer financing. As of the date of publishing, it offers promotional rates as low as 2.99% APR for 36 months through its WebBank Yamaha credit card on new 2016-2020 motorcycles. Yamaha’s normal APR range is 15.99%* to 23.99%*, depending on your credit history and score. Its credit requirements are more relaxed, focusing on first-time buyers and those with thin credit files. While there isn’t a set minimum credit score, you’ll know right away if you are approved in the dealership when you apply, according to Ultimate Motorcycling.
If you find the perfect motorcycle at a dealership, be sure to bring any preapproval offers you have from banks, credit unions and online lenders along. This will help you negotiate a great rate with the dealership.
Of course, you don’t have to use dealership financing if it can’t beat one of the offers you have in hand.
If you decide to use dealership financing, the application process will be similar to other motorcycle loans you applied for. A finance and insurance (F&I) manager will walk you through it. Their job is to help you get your best possible rate, but be aware that dealerships may add on to the finance company’s stated interest rate and keep the difference for themselves. This is legal, and it’s another way dealerships make money.
Most motorcycle dealerships can only offer interest rates as low as they can get with their financing partners. Chances are, you can do better on your own. In fact, if you already got your loan through the dealership and didn’t shop around or negotiate your rate, you may be able to save money by refinancing your motorcycle loan.
Some motorcycle dealerships, such as Reed’s Motorcycles, in Hurst, Texas, offers in-house financing. Sometimes called buy-here-pay-here lots, this type of dealership may not conduct a credit check. For example, Reed’s Motorcycles requires personal references, utility bills, recent paycheck stubs, two forms of ID, proof of insurance, a cell phone bill and the previous month’s bank statement or credit/debit card statement. This type of financing is typically costly and may even offer the maximum legal interest; so, if you have other options, it’s best to steer clear.
Other types of financing
Even if getting a motorcycle loan isn’t an option, you may have other choices:
It may be easier to get an unsecured personal loan with bad credit than a motorcycle loan, but it might mean you’ll pay a lot more for interest and fees.
The advantage of using a personal loan for this purpose is that if you default, you won’t lose your bike. The disadvantage is that bad-credit personal loans are expensive.
For example, a LendingClub personal loan could has an APR of up to 35.89%. Its minimum credit score is 0, but you have to demonstrate your ability to repay the loan. You can prequalify with a soft credit check online instantly and complete the formal application process entirely online, too. Its maximum personal loan amount is $40,000.
A home equity line of credit (HELOC) may seem like a tempting way to easily access the money you need to buy a motorcycle and pay for the associated costs, but keep in mind that you are using your home as collateral. This means that if you default on your motorcycle loan, the lender can use your home to pay off your debt.
Using a HELOC to finance a motorcycle is not an option we recommend.
How do you decide on your best way to finance a motorcycle when you have bad credit?
Choosing the loan with the lowest interest rate and fewest fees will help you finance your motorcycle purchase without paying more than you absolutely must. It’s crucial to shop around, and as mentioned previously, doing so won’t hurt your credit if you complete the process in less than a month.
Whether you choose a bank, online lender, credit union, dealership or pursue a non-traditional method, such as an unsecured personal loan, depends on your ability to repay the loan and your tolerance for fees and interest.
If you can qualify, a conventional motorcycle loan is probably going to be the least expensive way to borrow.
What to do if you can’t get motorcycle financing
Pay with cash. If you have cash on hand to buy a motorcycle, it’s a good idea to purchase a lower-cost used bike with the money you have so you don’t have to pay financing costs. According to the National Automobile Dealers Association (NADA), you should be able to find a decent used motorcycle for between $4,000 and $10,000. However, depending on where you live, you may be able to find a good bike for less than $2,000.
Improve your credit first. If your credit score is below the threshold for a bad-credit motorcycle loan, you may need to take some time to clean it up a bit. Check your credit report carefully for mistakes. Initiate the dispute process online with the appropriate credit bureau if you find incorrect information in your credit reports.
The best way to build credit is to make every payment on time. Collections and late payments have a hugely negative effect on your FICO credit score. Good payment history will help increase your score as older negative items age and eventually fall off your reports.
Consider a cosigner. If you need a loan right away, consider asking someone with good credit to cosign your motorcycle loan. Proceed with caution, though. Your cosigner will be legally responsible for the debt if you default, and if you make late payments it will hurt your credit as well as theirs.
Deal with your debt. Tackling your debt may be your best option if debt is the reason your credit score is low. According to Denise Fuller, a credit counselor at nonprofit, community-based Horizons in Cedar Rapids, Iowa, “When dealing with debt, it’s always better to contact creditors sooner rather than later. You may be able to work out an affordable payment plan with them. Even if your bill goes to a debt collector, you still have the opportunity to work out an agreement to pay them, and they may be willing to take less than the total amount due.”
Don’t pay a for-profit company to clean up your credit, though. You can do the same thing yourself with a few phone calls to your creditors.
Paying down credit card balances as quickly as possible could help boost your FICO score within a few months. If your debt isn’t manageable, you may need to reach out to a nonprofit credit counselor for help.
The bottom line
Bad credit isn’t a permanent barrier to owning a motorcycle. If you shop around for your best motorcycle loan option, you’ll not only have more companies from which to choose, you’ll know you got your best possible deal on your new bike.
*Rate accurate as of August 27, 2019