How To Get The Best Motorcycle Loan
Ready to hit the open road with the sun in your face? Riding a motorcycle provides you with a different kind of perspective, a different kind of freedom, but before you can hop on your bike and ride off into the sunset, let’s get you a great motorcycle loan
Getting a motorcycle loan isn’t that different from other loans you might have gotten in the past, like a car loan for instance, and by reviewing your options like the term, motorcycle pricing, insurance expenses, to name a few — you will want to make sure it’s affordable.
Keep reading to learn how to find the best motorcycle loan for you!
Find Your Motorcycle Loan Lender
While looking for a motorcycle loan lender, you have several options — and you should be familiar with all of them! These are similar to what you’d find when applying for an auto loan. Though keep in mind that while they’re both vehicles, auto loans and motorcycle loans are not interchangeable.
Dealership
It’s common to get a motorcycle loan through the dealership. Dealerships work with a network of banks and credit unions to offer loans to their customers.
When going this route, you get the convenience of a one-stop-shop experience. However, you’re likely to pay more on your loan. This is because dealerships want to make a profit off of your loan, so you often have a higher APR (annual percentage rate) to account for that profit.
Some dealerships also offer buy-here-pay-here financing in which they provide their independent financing without a bank or credit union. you will typically pay the most for this financing. Those who can’t qualify elsewhere are most likely to agree to these substantially higher interest rates.
Motorcycle Brand Manufacturer
You might also consider getting a motorcycle loan through your motorcycle manufacturing company’s financing department. If you have excellent credit, you could score an excellent deal on a low-interest rate.
Bank
It’s also common and convenient to get a motorcycle loan at a bank, especially if you already have accounts there. Banks are more likely to provide exceptional financing terms to those with excellent credit.
There are also mileage and motorcycle age limits to keep in mind since banks have guidelines on the type of vehicle they will finance.
Credit Union
Oftentimes, you can find the best motorcycle loan at a credit union. (Like us!)
Credit unions typically offer lower interest rates, more flexible terms, and fewer fees than the options mentioned above. As long as you’re a member, you can take advantage of a better motorcycle loan at your credit union.
Also, credit unions are more likely to be flexible with the age and mileage on your motorcycle, along with being understanding of your financial background, in case you don’t have top-notch credit.
Know What you Can Afford
Aside from choosing your lender, you want to be sure your finances are in order and know how much you can afford. There’s nothing worse than falling head over heels for a shiny new motorcycle, then finding that your loan amount won’t cover it or that it won’t fit in your budget.
Your actual budget and what you can qualify for are not the same. So be sure that you know how much you can comfortably afford to pay each month while considering your other financial responsibilities. A good guideline is to assign no more than 15% of your monthly net income towards vehicle payments.
Your financial status determines part of what you can afford. Here are some factors your lender will look at when determining your loan terms.
Credit Score
The higher your credit score, the better. Your credit score is an indicator of your financial health and responsibility. It takes things such as your utilization rate, on-time payment history, and more into consideration. Items such as a repossession, bankruptcy, or late payments might be a sign that you will struggle to make your motorcycle loan payments as agreed upon.
Debt-to-Income Ratio
Your debt-to-income ratio is another critical number that lenders will review when considering your motorcycle loan application. It is the ratio of how much debt you have compared to your monthly income.
The lower your debt to income ratio, the better — because you have flexibility in your budget to take on more debt. The opposite is true, lenders view a high debt to income ratio as a red flag. Some even have a max ratio that they will accept.
Your Down Payment
Your lender will also consider how much you’re putting down on your motorcycle loan. Not only does your down payment decrease how much you have to borrow, but it’s also an indicator to the lender that you’re serious about your motorcycle and willing to make an upfront investment.
Review Your Term Options
There’s a wide range of motorcycle terms you might qualify for. You want to find the best conditions. A great way to do this is to prequalify. You can usually complete the prequalification process in person or online with a simple application. It’s best to apply with a few different lenders within 14 days so you can compare terms and select the best option available.
Two of the most important things to consider are the APR and Loan Term.
Annual Percentage Rate (APR)
Your APR is the interest rate for your loan. You want to secure the lowest interest rate possible to keep the cost of your motorcycle down. Interest rates can range significantly based on the factors listed above, such as your debt to income ratio, credit score, and down payment.
Loan Term
Your term is how long the loan is. Terms generally range from 24 months to 84 months. The shorter your term, the higher your monthly payment, and the less you’ll pay in interest. The longer your term, the lower your monthly payment, and the more you’ll pay in interest. you want to compare the trade-off of these options to determine which is more important for your loan.
Don’t Forget About Insurance Expenses
Along with the cost of your vehicle, you also want to consider your motorcycle insurance options when looking at how much you want to pay.
Your insurance rate will vary based on your age, the age of your motorcycle, the type of motorcycle you buy, and even the state you live in.
Get a quote for insurance based on the type of vehicle you want so you can keep that idea in mind when determining your motorcycle price range.
Do you Want The Best Motorcycle Loan?
If you want to get the best affordable motorcycle loan, you have options — and now you know about them all! Be sure that your finances are in order so you can score favorable financing terms. And do your research on the motorcycle you want to purchase along with associated costs, such as insurance.
With a little due diligence, you will be well-positioned to secure the best loan and enjoying the open road before you know it.
Learn More About Motorcycle Loans With UMe Credit Union