Motorcycle Refinance: Is Now a Good Time?
Motorcycle refinance gives you the freedom to explore better loan options. You could qualify for a lower interest rate and/or monthly payment, or even tap into your bike’s equity for extra cash. Still, it costs money to refinance, and it won’t help everyone. We’ll help you figure out if refinancing your motorcycle loan will work out in your favor.
- By refinancing your motorcycle, you’ll swap your current loan for a new one.
- You might save by refinancing your motorcycle if interest rates have dropped or your credit score has improved.
- Many refinance lenders charge fees, but they’re usually tacked onto your loan or deducted from your loan amount — so you won’t have to pay out of pocket.
How does a motorcycle refinance loan work?
When you refinance, you’ll get a new loan (a motorcycle refinance loan) and use it to pay off your current motorcycle loan. The refinance lender usually sends your loan directly to your current lender, but it’s best to ask.
Refinancing can help you save money if you qualify for lower rates than what you’re paying now. Refinancing also gives you the chance to change your loan term — this is the amount of time you have to pay back your loan.
Play around with a refinance calculator to see how different rates and terms affect your bottom line.
It could be a good time for a motorcycle refinance if…
Interest rates have gone down
Your annual percentage rate (APR) shows you how much your loan costs, including interest and fees. The higher the percentage, the more expensive the loan. But if rates have dropped since you bought your bike, you could save by refinancing.
Imagine you owe $15,000 on your motorcycle loan. You have a 13% interest rate and three years left on your loan. Because rates went down and you’ve improved your credit, you now qualify for 9%.
If you were to refinance (keeping a three-year term), you’d save an estimated $1,008 over the life of your loan. Note, though, that this scenario doesn’t account for any fees the lender might charge (more on that later).
Your credit score has gone up
Check motorcycle refinance rates if your credit score has improved since buying your motorcycle. Generally, lenders start giving their lowest rates once you hit 740 (which is considered a “very good” FICO Score).
Your payment history makes up 35% of your FICO Score. This means that the payments you’ve made on your current motorcycle loan should help — assuming you’ve paid on time, every time.
Get free, personalized recommendations on how to improve each of the factors that affect your credit score with LendingTree Spring. We’ll show you how your credit stacks up and what to do to boost your score.
You need a lower monthly payment
You can choose a new loan term when you refinance your motorcycle. A longer loan term usually means a lower monthly loan payment. You’re giving yourself more time to pay off your loan, but you’ll pay more overall interest.
Going back to our previous scenario, your bike payment would drop from $505 a month to $311 if you were to refinance to a five-year loan term instead of keeping your original three-year term. However, you’d pay $480 more in interest over the life of your loan.
You want to remove a cosigner
Adding a cosigner can help you get approved for a loan if you have bad credit. But what happens if you no longer want them included?
You may be able to take them off if your current loan has a cosigner release provision. Otherwise, you’ll have to pay off your bike loan or refinance it. Keep in mind that you may not qualify for a refinance loan without a cosigner if your credit is the same — or worse — than it was when you bought your bike.
You need extra cash
A cash-out refinance lets you borrow from the equity you have in your motorcycle. Equity is the difference between how much your motorcycle is worth and how much you still owe on it. In other words, it’s how much of your bike you really own.
It’s not a good idea to get a cash-out refi loan with a higher rate just because you need cash. An emergency loan might make more sense in this situation. But if you do qualify for a lower APR, this type of motorcycle refinancing can come in handy.
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You might want to wait to refinance your motorcycle if…
You still won’t be able to afford your bike after refinancing
Refinancing to a longer loan term typically lowers your monthly payment and can help you better afford your bike. But if you know that you’ll still fall behind, refinancing is just delaying the inevitable — repossession or loan default.
Call your current lender and see if they have a hardship program — you might be able to pause your payments. Or, it may be time to sell your cycle and use the money to pay off your loan.
Worst-case scenario, you might be able to get out of your loan by giving your motorcycle back to your lender. This will severely impact your credit, but typically a little less so than an involuntary repossession.
The cost outweighs the savings
Unfortunately, refinancing isn’t free. Some lenders charge fees, like origination fees or dealer fees. You usually don’t have to pay these out of pocket. Instead, the dealer or lender will add it to your loan amount, which means the fees will also accrue interest.
Before accepting a refinance offer, compare the total cost of repaying your current loan with the total cost of refinancing.
Your current loan has a prepayment penalty
A prepayment penalty is a fee some lenders charge when you pay off your loan early. That’s because they’ll miss out on the interest you’d have paid while your loan was open. Not all lenders charge a prepayment penalty, but find out what your lender’s policy is before refinancing and paying off the loan.
Frequently asked questions
You can refinance a motorcycle as long as you can find a lender that will approve you. You can refinance just about any loan, including auto loans, mortgages and personal loans.
Upstart’s APRs on cycle loans are 6.60% – 35.99%. That’s among the lowest on the market — but APRs are like a fingerprint. Lenders look at a number of factors, including your credit score, credit report and income, to calculate rates. A good APR for you might be a bad one for someone else.
Shopping around is an easy way to find your best rate. Every lender has its own way of calculating prices. You could get a better rate from one company than another, even if the information you provide is the same.
The cost of a refinance motorcycle loan will depend on the details of the loan. To calculate the total loan expense, add up all of the new lender’s fees, plus the total interest charges over the life of the loan and any prepayment penalties you may have to pay to your current lender.
Refinancing a motorcycle loan can affect your credit score in a few ways. In the short term, your score may drop as a result of your loan application(s), new debt and a recently closed motorcycle loan. In the long term, however, your score can improve as you pay down the balance and make on-time loan payments.
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