Motorcycles are much cheaper than a car, often only a fraction of a four-wheel drive’s cost. With limited resources, you’re looking to purchase one so that you’ll have a vehicle to move around or go for an adventure. Unfortunately, you have a bad credit history, and it’s making it hard to get a loan. Where can you get the funds you need to get a motorcycle even with bad credit?
Getting a motorcycle loan with bad credit is difficult, but it’s not impossible. In this article, we’ll talk about your options. Let’s dive in!
What is the Minimum Credit Score for a Motorcycle Loan?
There’s no fixed standard credit score for a motorcycle loan, but some say between 670 to 850 is best. Essentially, you need to have a good credit score to get the best rates for a motorcycle loan.
A good FICO Score is 670 to 739 and a good VantageScore is 601 to 660. FICO is the most common credit-scoring that lenders use. Many lenders also use VantageScore, which was created by Experian, TransUnion, and Equifax, the three national credit bureaus.
How to Get a Motorcycle Loan with Bad Credit and No Cosigner
Even with a non-stellar credit history or without a cosigner, you can still obtain a loan to finance a motorcycle—as long as you do your due diligence. Most lenders that cater to bad-credit borrowers have sky-high interest rates and fees, so you must do your research and compare rates. It’s not impossible to find bad-credit loans with favorable interest rates.
Here are some steps to take when taking out a motorcycle loan with bad credit:
1. Know Your Credit Score
Get a copy of your credit report so that you’ll have the right information to use in your applications. You’re entitled to one free credit report copy per year from the three credit bureaus in the country: Experian, TransUnion, and Equifax. Some lenders also do a pre-qualification process, so you’ll also know if you qualify based on your credit score.
2. Ensure that You Can Afford to Repay the Loan
Determine how much loan you can afford to pay back, which means you need to be honest about the motorcycle you can afford to buy. Assess your income and work on your budget to make sure that you will not fall behind the monthly amortizations. Otherwise, you’re setting yourself up for debt.
3. Compare Loan Rates from Different Lenders
Don’t settle for the first lender you see on the results page on Google. Instead, look for other providers and compare their rates. Read the fine prints, particularly the interest rates, fees, and repayment terms. Check reviews about them.
4. Don’t Fall for Bad-Credit Loan Scams
Many people will take advantage of your desire to get funding even with bad credit, so be careful when searching online. Some of the red flags you should be aware of are the following:
- They require you to give them upfront fees, which should’ve been deducted from the loan proceeds
- They don’t have a Federal Trade Commission registration in your state
- They have an unsecured website
- They don’t have a physical office address
5. Build Your Credit Rating First
If you can wait to get the motorcycle of your dreams, it’s best to work on rebuilding your credit history first. It will take time, but with an improved rating, you’ll have better loan terms. We’ll talk about more tips for building your credit in the sections below.
What are the Best Bad-Credit Motorcycle Loans?
If your score is lower than the good ratings mentioned above, you may still be able to qualify for other loans. Here are the top motorcycle loans for bad credit:
1. Dealer Financing
You can apply for a motorcycle loan directly to the dealer or manufacturer. With motorcycle loans through a dealership, the dealer has two options:
- Send your application to a lender on your behalf to secure funding
- Provide you with in-house financing
The latter also called “buy here, pay here,” is often what happens for people with bad credit. However, it has higher interest rates than the traditional loan from a bank. For instance, Harley-Davidson’s annual percentage rate (APR) starts at 3.99%. You can estimate the costs here.
Harley-Davidson and Bright Power Sports are examples of dealers/manufacturers that provide financing. You can apply online through their websites. Be ready to provide the following information:
- Address
- Contact information
- Date of birth
- Social Security number
- Income
- Employer
To get the best deal, it’s ideal if you can pay as much down payment as you can. It will show the dealer that you have the means to pay. Likewise, your monthly amortization will also be lower.
2. Third-Party Lender
Not all auto loan providers also provide loans for motorcycles. If you have bad credit, you can find third-party lenders who are willing to accommodate you. Here are three examples you can check out:
Loans from third-party lenders also have high-interest rates. For example, MotorcycleLender offers unsecured loans for poor-credit borrowers with an APR that starts at 6.99%.
You can apply through its website. First, you’ll need to provide some basic information, such as your contact information, Social Security number, credit score, how much you want to borrow, and the purpose of the loan.
Applying online is faster. You can usually know the approval decision within minutes to one business day.
3. Secured Loan
The motorcycle you’re buying often serves as the collateral if you take a secured loan. However, if you have other properties that you can use as collateral, such as your home, you can get better loan terms. But remember that you’re putting them at risk. If you default on your loan, you risk losing your house too.
One secured loan you can check out if you have a bad credit history is TD Bank Personal Secured Loan. You can borrow from $2,000 to $50,000 and pay them back between 12 and 60 months. Its APR starts at 6.99%.
4. Personal Loan
If you’re looking for inexpensive or used motorcycles, a personal loan will do. But do it as your last option. Personal loans have even higher APRs that range between 5.99% and 35.99%. Shop around and compare the choices to get the best deal. You can borrow between $500 to $35,000, with up to 72 months of loan terms.
Some lenders that cater to poor-credit borrowers are:
Complete the applications online, and you’ll get the results within the day and get your funding the next business day.
Other types of loans that you may consider are:
- Payday loans
- Cash advances
- Bank agreements
- Home equity loans
- Home equity lines of credit (HELOCs)
Tips for Improving Your Credit and Increase Your Chances of Getting a Loan
To increase your chances of getting a motorcycle loan, you should improve your record first. Here are some steps you can take:
1. Pay Your Bills on Time
If you have existing credit lines with banks or credit unions, make sure that you pay your monthly bills on time. You can also participate in credit-building programs, such as those that allow you to submit your utility payment history to the credit bureaus. These will help improve your credit score.
2. Reduce the Outstanding Debt You Have
Pay your outstanding debt as much as you can. Lenders consider your debt-to-income ratio, which refers to the amount you owe versus the amount you earn each month.
3. Fix Errors on Your Credit Report
When you take a copy of your credit report, examine each item to ensure that there are no mistakes. Does it show a wrong eviction-related item? Does it still reflect a credit card debt you’ve already settled eight years ago? These negative items can affect your credit score, so you must submit a correction request to the credit bureaus.
4. Don’t Open Too Many Credit Lines
Opening new credit lines can hurt your credit score. Even just submitting applications to multiple institutions all at once can already cut some points from your score. So, if you’re planning to buy a motorcycle soon, stick with your current credit lines. Likewise, you must not close any of them, even a credit card that you don’t use.
Conclusion
Taking a loan to finance your dream motorcycle even with bad credit history is not impossible. Aside from rebuilding your credit record by following our tips above before you apply for a motorcycle loan, you have other options. However, you must do your due diligence and not rush into signing an agreement quickly. Most of them have exorbitant rates and fees, so you need to ensure that you get the best deal possible and one that you can truly afford.
Have you tried applying for a motorcycle loan even with a bad credit standing? How did the application go? What did you do to improve your chances of getting approved? Please share your experience in the comments below so that others can learn a thing or two!
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
