Tip One: Check Your Credit
The first step in getting a motorcycle loan, or any loan for that matter, is checking your credit report.
Know Your Score
After you decide on a motorcycle, the first thing that a dealer is going to do is run your credit, and they will not always be honest about what they find. Know your score so that you know what kind of rate you should actually qualify for.
Check For Errors
Errors on credit reports are far more common than you might think. Pull a copy of your report from every bureau and make sure that there are no surprises. Keep in mind that if you find errors, it will take one to two months to get them removed from your report. This means that you need to do this as quickly as possible.
Look For Opportunities
Another benefit to pulling your report is the opportunity to make some quick improvements. The easiest and quickest improvement that you can make is to lower your revolving credit. This is the amount of your available credit that you are using and you really want this number to be under 10 percent. This is not an all or nothing metric though, the closer you get to the magic 10 percent number, the higher your credit score will be.
Tip Two – Get Pre-Approved
The most convenient thing to do when looking for a motorcycle loan is to just head down to the dealership, pick out a bike and let the dealer arrange financing. Simple comes with some costs however, which is why you should get pre-approved from a local credit union first.
If you head straight to the dealer this very second, they will tack on a few points to your interest rate. It is just one way that the dealer will try to make extra money off of the back end of the loan. They can get away with doing this because most borrowers do not know what interest rates they truly qualify for.
Getting approved by a local credit union will let you know what rate you truly qualify for. You can then still give the dealer a chance to earn your financing, but with a number they need to beat.
Tip Three – Shop The Right Number
Dealers are masters at playing tricks with numbers, so you need to shop the right loan numbers. Monthly payments can be easily manipulated by simply stretching out the loan term. That dealer might be able to beat the monthly payment from the credit union but it might add years to your loan. Do not fall for the number games.
Always ask to see all of the numbers including the amount financed, the interest rate and the total cost of the motorcycle loan.
Tip Four – Understand That Everything Is Negotiable
The dealer makes money on every part of the transaction. This means that warranties, GAP protection and interest rates are all negotiable.
The problem is that by the time you get to the finance department, you are ready to go, and this is no accident. You have likely been at the dealership for hours and just want to ride away on your new motorcycle. Your dealer counts on your impatience to double their profits by making money on the back end of your loan.
When you get into finance, take the opportunity to dispute every charge that you can. It might cost you a few extra hours of time, but it could save you hundreds, if not thousands of dollars on your loan.
Tip Five – Come To The Table With Money
Zero down payment loans are great, but they come with significant risk to lenders, and that means a higher rate for you. If you were to default on a loan with no don payment, it is unlikely that any lender could recoup their losses by simply selling your motorcycle.
Motorcycle loans are also particularly risky for several reasons. First, they are a luxury for most people and that means if times get rough, they are the first loan people stop paying on. Second, motorcycles can be harder to repossess because they are al too simple to hide. That makes an involuntary repossession difficult at best.
For a motorcycle loan, try to come up with 20 percent down, or as close to it as you can.
Motorcycle Loan FAQ’s
What Is A Good Loan Rate?
A good rate for you will depend on your credit score, and with interest rates on the rise, good rates for everyone are changing. In general, if you have good to excellent credit your rate on a motorcycle loan will likely be between 3 and 6 percent. With fair to poor credit, you can expect this rate to be in the 10 to 20 percent range.
In any case, lender rates will vary so it pays to chop your rate around. Just be sure to do all of your loan shopping within a 10 to 14 day period. This is known as rate shopping and credit bureaus will generally count multiple hard credit hits as one, if they come in a short period.
Do I Need A Down Payment
If you have good to excellent credit, chances are good that you can get approved for financing without a down payment. That being said, you are almost always better off putting money down.
The more money that you put down, the lower the risk for the lender and that means a lower rate for you. Try to shoot for a down payment of 20 percent for the best rates although most people never put this much down. The average down payment in the United States is closer to 10 percent.