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Powersport Loans for Bad Credit
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If your credit is less than stellar, you may think that buying the powersport vehicle of your dreams is out of reach. While it’s true that getting financing with poor credit can be more expensive, bad credit ATV loans and other bad credit powersport financing are available. Not only is financing possible, but getting an installment loan, such as vehicle financing, can actually improve your credit score if you make all of your payments on time.
Here’s what you need to know if you’re interested in ATV financing or any other powersport vehicle loans when you have bad credit.
Bad credit ATV loan options
Many powersport loans are a type of unsecured loans, also known as personal loans. This means that what you buy doesn’t matter; you could use one to finance any of the powersport or ATV brands you’re interested in. We did some research and determined the best personal loans for fair or bad credit.
|APR||5.99% –24.99%||5.99% –29.99%||4.37% –35.99%|
|Terms (months)||24 and 60||36 or 60||36 or 60|
|Loan Amount||$5,000 –$40,000||$4,000 –$25,000||$1,000 –$50,000|
|Origination Fee||0.00% - 5.00%||1.00% - 5.00%||0.00% - 8.00%|
You won’t know the exact terms you qualify for until you apply.
But before you look exclusively at lenders that offer loans for bad credit, don’t automatically assume you have bad credit. “First of all, let’s check and see what your credit score is,” recommends Karen Ford, financial coach at KarenFord.org in Fairmont, W. Va. “Why do you think your credit score is bad? Maybe something happened five years ago. It might not be that bad now.” You can get your free credit score here.
Regardless of where you get financing, any interest rate below 12% on a powersport vehicle would be doing really well. “Outrageous would be 18% or more,” she said.
You can use an ATV loan calculator to see what your payment may be for different ATVs, UTVs and other powersport vehicles.
Other lenders that offer bad credit ATV loans
Banks and credit unions
If you already have an account with a bank or credit union, getting a loan from them may be convenient. You could get preapproved before you shop so you know how much you can borrow.
Though banks and credit unions are very similar, a credit union may offer lower fees and preferential terms because they are nonprofit organizations that are owned by their members and often pass savings and earnings back to them.
Some manufacturers have their own finance companies, while others partner with a bank or other lender. Dealership financing uses the vehicle as collateral. If you miss payments, the lender will repossess the vehicle. The good news is that approval requirements are less strict, because the collateral protects the lender.
While dealerships can be a good place to get a loan because the dealership is motivated to make a sale, be sure to shop around before you sign. Michael Internoscia, principal CEO of M & M Private Lending Group, LLC, in Miami, cautions against dealerships that advertise “buy here, pay here” vehicle sales. “The likelihood is that the vehicle is going to be overpriced, and if your credit is bad, they’re going to charge you something like 24%,” he says.
The advantage of online lending is that you can quickly get an idea of the loan and interest rate you qualify for. You can get prequalified for a loan, even before you know which vehicle you want to buy. If the dealer or another lender then offers you a better deal than you can get with an online lender, there’s no obligation.
Other types of financing for ATVs and powersport vehicles
You might also look into other ways to finance a powersport vehicle, depending on what is available to you. For example:
1. Person-to-person loan
You may be able to borrow from someone, such as a family member or friend. This could be a viable option if you have a good relationship with the person, you’re not endangering their finances and you’re sure you can pay back the loan in a timely fashion. This option could allow you to avoid paying interest, though we advise proceeding with caution if you chose this option.
A home equity line of credit (HELOC) is like a second mortgage that allows you to access a portion of your equity in your home. However, we generally advise against using a HELOC. By adding more debt to your home, you could find yourself owing more than your house is worth. Additionally, if you aren’t able to repay your loan, you could lose your property.
3. Credit cards
If you have a high enough credit limit and are confident that you can pay it off on time, you can put your powersport vehicle purchase on a credit card. This idea is especially tempting if you are able to receive rewards points for your purchase. However, if you have a bad track record of making on-time payments, this is a risky decision as it could easily cause you to rack up debt and further damage your credit score.
The interest rate for credit cards may be higher than you can get elsewhere. The average credit card interest rate in May 2021 was 19.31%, but your rate could be higher if you have credit challenges.
How do you qualify for a bad credit ATV loan?
Lenders need some kind of assurance they will get paid back before they lend money. You could read the specific steps and more in-depth information on how to qualify here.
What the lender looks for in your finances
The first thing that most potential lenders do when reviewing your application is pull your credit report. Lenders also look at your income, and they will typically want proof of income, in the form of a pay stub and tax returns. If too much of your income is already committed to debt payments, that’s a red flag. Lenders typically want your debt-to-income ratio to be 36% or less.
Getting a loan, especially with low interest rates, is easier if you have a good score. If that’s not the case, however, you should get credit by showing creditworthiness in another way, such as:
- Making a down payment: A substantial down payment can help you get a loan. Ford says that even $500 down could help convince a lender you won’t want your vehicle to be repossessed. The more you put down on a vehicle, the less likely you are to default, because you have more skin in the game. If you make a substantial down payment and you do default, the lender is more likely to recoup what they’re owed when they repossess.
- Applying for a secured loan: A lender might be more willing to approve you for a secured loan, such as those from the dealership. These tend to be safer for lenders because they allow the lender to repossess the vehicle if you fall behind on the payments. The lender can then sell the vehicle to pay off your loan and other expenses.
- Improving your credit before applying: Another option is to work on improving your credit score before you apply. Make payments on time, and carefully monitor your credit score, possibly even getting alerts as it changes. As you keep making your payments on time, your score should tick up. If you can pay a little extra on your balances, that will help, too.
What the lender needs to know about the powersport vehicle you are financing
When you apply for a loan, the lender will ask you questions about the vehicle you are buying and how it will be used. For example, you will need to answer questions about:
- The make, model and model year of the vehicle
- The vehicle’s price
- The vehicle’s mileage
What to budget in a bad credit ATV loan
Costs vary considerably among models and years of powersport vehicles, but here’s an idea of how much you may need to spend to buy each major type. Keep in mind that buying used could save you 50% or more off the new price tag.
- Motorcycles: At the top end, you could get a new, 2021 Harley Davidson cruiser for around $20,000. On the economical end, a 2004 Yamaha trail bike has an average retail of $680. Here’s a motorcycle loan calculator if you want to see what your payments may look like.
- All-terrain vehicles (ATV): A new ATV can run around $8,000 for an average 450CC model. The price runs higher or lower, depending on whether you want extra power and all of the add-ons.
- Snowmobiles: New snowmobiles can be much more expensive, but both ATVs and snowmobiles depreciate rapidly, however. You can find used ones for as little as $2,000.
- Personal watercraft: For a new, high-end personal watercraft, you could spend over $30,000. If you’re happy with a more compact, “rec-lite” model, you can get one for less than $5,500. Here’s specific advice on Jet Ski financing.
Licensing, insurance and safety gear
State laws vary, but you generally need a driver’s license. Some states may require special training, licenses, insurance and safety gear, such as a motorcycle helmet for ATVs and life jackets for jet skis.
You’ll need a way to get your vehicle to your off-road location, which means you could be shopping for a new pickup and trailer. You could spend anywhere from a few hundred on Craigslist to $4,000+ from a dealer on a trailer.
Fuel and maintenance
Fuel may be one of the first expenses you think of, but it actually can turn out to be one of the least consequential. Powersport vehicles tend to be very frugal on fuel. However, regular maintenance and repairs could add up. Talk to the seller, look on the manufacturer website and do a Google search to find out what you could expect to spend for your specific powersport vehicle.
Taxes are a necessary part of purchasing a vehicle in most states. Different states will charge different sales and personal property tax rates. Depending on your state, you could pay less than 2% (Alaska) or nearly 10% (Tennessee).
Bad credit ATV loans and other powersport loans could have high APRs and origination fees. The best way to estimate this cost is to get preapproved so you know what rates you qualify for and know your budget better.
Is a bad credit ATV loan worth it?
Powersport vehicles are popular because they represent freedom and thrills in the great outdoors. Financing a powersport vehicle, even if your credit is less than excellent, doesn’t have to be a bad decision. Plan your purchase, make sure you can afford the payments alongside your other expenses and then always make your payments on time.
To save even more on interest, make extra payments on your powersport vehicle and pay it off early. You’ll enjoy your powersport vehicle even more when it’s all paid off.