Motorcycle loans are offered by most consumer auto lenders.
If you wish to purchase a new or used motorcycle and you do not have the required funds, you’ll need a loan to make up the difference. Fortunately, with the sheer number of lenders available, you can probably get financing even if you have poor credit. If you have excellent or good credit, the search will be much easier. There are plenty of online lenders that can help you purchase your dream cycle.
1. Access a copy of your credit report. Go to www.AnnualCreditReport.com to get a free copy of your credit report from all three credit bureaus—TransUnion, Equifax, and Experian. Also, pay for a copy of your FICO score, a three-digit number ranging from 300 to 850. FICO stands for Fair Isaac Corporation, named after the founders of the score. You should pay for this score (between $5 and $15) because it will help guide you on your search for an appropriate lender.
2. Look for online auto and motorcycle lenders. Use your FICO score to help you. Scores over 720 are excellent. If you have excellent credit, limit your search to top-tier companies, like Key Bank, Bank of America, and local credit unions. If you have poor credit (a FICO below 600), you’ll need to broaden your search to finance companies, like E-Loan.
3. Calculate your debt-to-income ratio (DIR). This is the ratio that lenders use to determine your ability to repay the motorcycle loan. Divide all monthly credit-reportable bills by your monthly gross income. Most lenders will lend to borrowers with a DIR below 60 percent, but it’s better if your DIR is below 50 percent. The lower your DIR, the lower your interest rate (and payment) will be. A low DIR means less risk to the lender. Both your credit score and DIR are factored in when lenders determine your rate.
4. Compare all motorcycle loan options side-by-side. You’ll need to know exactly how much you need to borrow before you begin comparing offers. Look specifically at the rate (and whether it’s fixed), and the fees associated with the loan transaction.
5. Narrow your options to three to five lenders. Research the reputation of these companies by checking the Better Business Bureau. This rating agency will show the reputation of any potential motorcycle lender. Do not do business with any company whose rating is below “B.”
6. Apply at two or three online lenders. Too many applications may negatively impact your credit score. Make sure the terms (e.g., rate, length, fees, etc.) are clear before you sign a contract. You’ll need to provide your income documents and proof of motorcycle insurance (either by e-mail or fax) before obtaining the financing.