A motorcycle loan can be a great way to finance the purchase of a new or used bike. However, it’s important to understand how interest rates work for a motorcycle purchase before you apply. The best way to find the best rates for a motorcycle is to shop around and compare offers from various lenders. There are many factors that affect the interest rate for a motorcycle, including your credit history, debt-to-income ratio, loan amount, and repayment terms. You may also be able to qualify for a lower rate if you put down a larger down payment on your purchase.
Generally, the best motorcycle loan rates are reserved for borrowers with excellent or good credit scores and low debt-to-income ratios. Lenders look at these factors to determine your risk profile and creditworthiness. Whether you’re applying for a secured or unsecured motorcycle loan, you’ll likely have to meet minimum credit score requirements and a debt-to-income ratio of 36% or less.
The type of motorcycle loan you choose will also impact your interest rate. A secured motorcycle loan is backed by the value of your bike, which reduces your risk and allows you to borrow at lower rates than an unsecured personal loan. Secured loans are available from banks, credit unions, and some online lenders, such as LightStream. Those lenders will typically require a minimum credit score of 629 or higher and will charge a fee, called an origination fee, when you borrow.
There are also a number of motorcycle financing options from credit unions that offer competitive rates. For example, Southeast Financial has a motorcycle loan that is designed specifically for bikes and offers lower rates than you might find at a bank. Digital Federal Credit Union, another top choice for motorcycle loans, has low rates and provides flexible loan terms. However, you must be a member of the credit union to qualify for a loan.
A loan application for a motorcycle will require similar information as other types of loans, such as your name, address, employment history, and income. You may also need to provide a copy of your driver’s license and proof of insurance. Some lenders also ask for your social security number to verify your identity.
In addition to the factors listed above, the lender will review your debt-to-income ratio and credit history when determining your motorcycle loan rate. This is a crucial step because the higher your debt-to-income ratio, the less likely you are to be approved for the loan you need.
Once you’ve found the best motorcycle loan rates, you’ll need to decide how much you want to borrow. You can use a loan calculator to help you calculate your monthly payments and the total cost of the loan, which includes interest and fees. A calculator can also show you the effect of different repayment terms on your monthly payments and total costs.
While you’re shopping for a motorcycle, be sure to consider dealer promotions. They often have enticing low introductory rates, but these rates will climb after 12 or 24 months.
