Motorcyclists love the unparalleled adrenaline rush that comes with riding on the open road on their favorite motorcycles or hitting the apex, rather than a large van. A quality ride allows for a more enjoyable and safe experience, but it can be expensive upfront, making the purchase out of reach for many.
If you’re having trouble meeting the price tag of your desired motorcycle, you can use various financing strategies to fund the purchase. Popular options include dealership financing and personal loans. In this guide, we explore the pros and cons of different financing options for buying a motorcycle.
Motorcycle ownership trends
Motorcycles are the chosen mode of transportation for both regular commuters and thrill-seekers. According to Statista, consumers buy around half a million motorcycles in the United States. Owning a motorcycle comes with various benefits, such as:
- Fuel efficiency
- Easy parking
- Stylish ride
- Less traffic to endure
- Meet rider friends
Traditional motorcycle financing options
Many motorcycle dealerships are happy to provide customers with financing options. You can reach out to a dealership’s finance department for more information on its particular terms and requirements.
Motorcycle loans from banks and credit unions
Some banks and credit unions offer loans specifically for motorcycles. Typically, these loans would be backed by your purchased motorcycle as collateral. This can make it easier for you to be approved for a loan, especially if you have poor credit.
However, these secured loans are often higher risk, since if you default on the loan your motorcycle may be repossessed by the bank or credit union. If you’re not sure you can meet the repayment terms of a loan, it is advisable to be cautious about taking the loan out in the first place.
Manufacturer-sponsored financing programs
If you prefer to directly receive financial support from the manufacturer, some motorcycle companies do offer financing options. This means you don’t need to go through a lender, bank, or credit union. Instead, you can directly go to a motorcycle store such as Harley-Davidson.
Exploring personal loans for motorcycle purchases
If you successfully obtain a personal loan, the approved loan funds will be directly disbursed into your bank account. You can then use this for various goals, such as buying a motorcycle. Over time, you’ll be expected to repay the entire loan plus interest.
While the total cost of the motorcycle will be higher than if you pay the entire cost upfront, using a personal loan can greatly reduce the immediate strain on your finances. This means you can opt for a more expensive model that you have set your eyes on.
Here are the main reasons you might want a personal loan for buying your motorcycle.
Personal loan funds aren’t limited to just your bike purchase. Whether you have any extra funds from the loan or want to prioritize a different purchase, you can use your loan amount however you wish (with few exceptions). This flexibility in usage is a great advantage of taking out a personal loan instead of using an alternative financing strategy.
No down payment required
Personal loans usually don’t require you to make any down payment, unlike leases. If you’re worried, you can inquire about whether you need to make a down payment as you compare lenders.
Easier to secure
If you lack an impressive, established credit history, it may be harder to secure other types of financing. Personal loans may be easier to obtain even if you have a poor [credit] profile but still want to buy a motorbike.
Clear repayment terms
Personal loan repayment terms are well-defined and clearly structured. This provides borrowers with a sense of predictability, which facilitates financial planning and budgeting. Most personal loans come with fixed interest rates and a standard repayment schedule.
Criteria lenders consider for loan approval
Different lenders may use varying criteria when reviewing loan applications. The two main determinants influencing whether you will receive a loan are your level of creditworthiness and your financial stability.
Here are some common factors that lenders take into account when evaluating your creditworthiness for a personal loan.
- Credit score
- Credit history length
- Loan purpose
- Loan amount
Advantages of using personal loans for motorcycle financing
Personal loans for motorcycles can offer you plenty of advantages. Here are the top benefits associated with motorcycle personal loans.
Personal loans are fairly fast when it comes to providing you with the loan amount. Some quick lenders even offer same-day approval loans, whereas others provide expedited funding with a fee. If you want to enjoy a quick funding process and secure your shiny new ride, a personal loan can help you buy your dream motorcycle without much delay.
No motorcycle restrictions
If you opt for other financing options, you might be restricted in the type of motorcycle you can buy. With a personal loan, you can freely purchase the model and make that you want. In addition, you can make any customization choices or accessory purchases with your loan funds.
Simple application process
Whether you want to apply for a loan online or in-person, reputable lenders typically offer borrowers streamlined, simple application processes. A loan officer can also help answer any questions you might have.
Competitive interest rates
For borrowers with good to excellent credit, personal loan rates can be low, especially when compared to credit card interest rates. A low interest rate means that you can save more money in the long term throughout the life of the loan. If you have good credit and financial planning, you might want to consider taking advantage of the favorable loan terms you can obtain.
Cover additional costs
Since personal loan funds are highly flexible in permitted usage, you can use the rest of the loan amount to cover additional costs such as:
- Motorcycle mods
- Safety essentials
Points to ponder before securing a personal loan for a motorcycle
Securing a personal loan can help you meet your goals, but it does create a debt that may take some time to pay off. Before signing any loan agreement, consider the following.
The total cost of the loan
Taking out a loan means incurring various costs, as well as potential penalties if you can’t manage the repayment terms. Make sure that you are fully aware of the interest rate and any associated fees. Common personal loan fees and charges include:
- Origination fee
- Prepayment penalty
- Application fee
- Late payment fee
To quickly compare the favorability and costs of multiple loans, you can look at the annual percentage rate (APR). The APR tells you the cost of borrowing in a year, and lenders are legally required to tell borrowers what the APR is of the loan.
Your ability to repay the loan
Your repayment capacity depends on numerous factors, such as your personal financial health, ability to budget, and employment stability. After obtaining a personal loan, you will need to manage monthly repayments. The good news is, these installments are typically fixed and predictable, which should facilitate repayment. However, if you don’t have a stable income source, it may be worth thinking about whether now is the best time to take out a loan.
Different loan offers from multiple lenders
An effective strategy for securing a personal loan with the best rates for yourself is to compare different loan offers. If you have the time, consider your available lenders so that you can find the best deal and save money in the long run. You may also want to try negotiating better loan terms with prospective lenders, particularly if you have excellent credit that you can leverage.
Make sure you carefully review and understand all the loan terms and conditions before you sign the binding agreement. Note down the interest rate, fees, conditions, and what counts as a loan default. If you might pay back the loan early to reduce the overall accrued interest, check if there is any prepayment penalty.
Applying for a personal loan will result in lenders making hard credit checks (AKA hard inquiries). These credit inquiries can drop your credit score by around five points each. If you make numerous successive personal loan applications, it can damage your credit score, making it harder to receive credit or loans in the next few months.
A strategy borrowers use to reduce the credit impact of loan applications is to go through the pre-approval or pre-qualification processes. By providing lenders with certain key information, lenders can give you a preliminary idea of what loan terms you can obtain.
Some models depreciate fast, whereas other motorcycles maintain their resale value. If you don’t have your heart set on a specific make, consider the resale value of the motorcycle before you take out a loan. Having a clear idea of what you’re looking to buy can help you maximize the benefits of securing loan funds.
Alternative methods to finance a motorcycle
If personal loans don’t align with your needs and priorities, consider these alternative methods for financing a motorcycle.
Lease a motorcycle
Leasing a motorcycle gives you the right to drive a designated motorcycle. You will need to make regular, monthly payments that ultimately make the motorcycle cost more than if you purchased it outright.
However, motorcycle leases require down payments. When you lease a motorcycle, you will generally need to put down up to 20% of the value as a down payment. This can be harder to afford than a personal loan in the short term since it can have a greater impact on your savings and finances.
If you want to check out your motorcycle leasing options, ask your local dealerships. Unlike auto dealerships that commonly offer auto leases, motorcycle dealerships do not frequently provide motorcycle leases, which may restrict your choices.
Peer-to-peer (P2P) lending platforms allow you to borrow from another individual instead of the usual personal loan lender or bank. P2P lending is an attractive option for borrowers who cannot secure favorable terms from traditional lenders. However, it may take longer to find a suitable and willing P2P lender via an online service due to the higher risks that the lenders will have to take on.
It’s always possible to dip into your own personal savings if you want to buy a motorcycle. However, be cautious if you’re using up a significant portion of your savings. You don’t want to be caught off guard by any unexpected circumstances that might result in serious financial strain.
For those using their personal savings to make a large purchase, it’s generally recommended to avoid dipping into emergency funds. That way, you can maintain financial stability even if emergency expenses arise.
If you don’t mind riding a used motorcycle, this could be an economical choice for you. Many motorcycles are bought and resold at lower prices. While it can take longer to find your desired motorcycle, you can simplify the process by searching for a particular make, model, or year.
Before buying your motorcycle, make sure that you research and understand all the financing options. It’s important to balance realistic financial planning with your passion so that you can reduce the strain on your finances while still reaching your goals.
A personal loan can help you fund your dream motorcycle, making it a valuable choice for many motorcycle enthusiasts. If you’re facing the challenge of the high upfront costs of buying a motorbike, consider taking out a personal loan.
Resources and further reading
Choosing the right lender can greatly improve your borrowing experience. Here are a few reputable lenders to consider to get you started with personal loan shopping.
Each lender has their own requirements and strengths. It’s a good idea to compare competitive loan offers before committing to one. Pre-qualifying for a personal loan can help you find the best loan more quickly, and with minimal credit impact.
Personal Loans Company Reviews
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