Everything you need to know about motorcycle loans

When comparing motorcycle loans, carefully consider the APR, which is the total cost of the loan, including interest and fees.

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Before you hit the open road with a new bike, you may need a motorcycle loan to pay for it. Here’s what you need to know about motorcycle loans. (iStock)

Even though motorcycles are generally cheaper than cars, you may still need a loan to purchase one if you don’t have enough cash. You may seek a loan if you want to upgrade your bike. Or, you may be able to pay for a motorcycle with cash but opt for a loan to help build your credit, particularly when interest rates are low.

If you’re thinking of using a personal loan to fund your motorcycle purchase, check out Credible to compare personal loan rates in minutes.

What’s a motorcycle loan?

Motorcycle loans are either personal loans or specialty loans that you use to purchase a motorcycle or ATV. A motorcycle loan is like a car loan — the lender extends funding, and you repay the loan in monthly installments with interest. Loan amounts are typically smaller for motorcycle loans than they are for cars, trucks, or other vehicles.

Where can I get a motorcycle loan?

You have several motorcycle loan options to help you purchase your dream bike. 

  • Online lenders — These lenders don’t have the brick-and-mortar overhead to deal with, so you may find more competitive rates and a streamlined application and funding process.
  • Banks — You may prefer to work with a banking institution you’re familiar with, especially if you already have an account established.
  • Credit unions — Credit union interest rates tend to be lower than those from traditional brick-and-mortar banks. Credit unions typically require membership in order to offer you a loan, but these requirements are often minimal.
  • Dealerships — If you’re purchasing a motorcycle at a dealership, you may be able to apply for financing through the dealership. While this is convenient, the dealership may require a down payment, and it may mark up your APR. Be sure to compare several loan offers before you sign on the dotted line.

How to compare motorcycle loans

When you’re shopping for a motorcycle loan, compare important factors for each lender, including the following:

  • Loan amounts — When comparing prequalified offers, you can cross lenders off your list who can’t offer you the amount you need. You’ll also need to make sure the monthly payment falls within your budget. You can use a personal loan calculator to get an idea of how much you can afford to borrow.
  • APR — The annual percentage rate, or APR, takes into account the total cost of the loan, including your interest rate and any fees you have to pay. A lower interest rate generally means your loan will cost less overall. The interest rate you’re offered depends on your credit history, the loan repayment term, and other factors.
  • Repayment terms — The repayment term is the length of time you have to repay the loan. Personal loan terms typically range from 12 to 60 months or longer. Longer loan terms mean lower monthly payments, but you’ll end up paying more in interest over the life of the loan.
  • Fees — Keep an eye out for fees as you compare different loan offers. Read the loan agreement and look for fees like origination fees and closing costs. Your lender may even impose a prepayment penalty if you repay your loan early.

You can start comparison shopping by reviewing Credible’s list of partner lenders that offer motorcycle loans.

Secured vs. unsecured motorcycle loans

Many motorcycle loans — like those from dealerships — are secured, which means you must use the motorcycle or another asset as collateral. Keep in mind that when you have a secured loan, the lender can repossess your collateral if you don’t make your payments.

If you don’t want to risk losing collateral with your loan, you may opt for an unsecured personal loan. Unsecured personal loans represent more risk for the lender, since it can’t recoup any costs if you fail to repay your loan. To help mitigate the lender’s risk, unsecured loans may have higher interest rates and require higher credit scores for approval.

How do I get a motorcycle loan?

Even though your motorcycle loan may not be as big as a car loan, you still want to make sure you get the best possible deal. The good news is that you can usually apply for a motorcycle loan online. Here’s an easy four-step process to get a motorcycle loan:

  1. Review your credit. Lenders will review your credit score and income to determine if you qualify for a loan. This is especially true with unsecured loans. It’s best to review your credit report first, looking for damaging errors, and dispute any mistakes you find.
  2. Figure out how much you can afford. Getting approved for a motorcycle loan won’t do much good if you can’t afford it. Run the numbers with a loan calculator and make sure there’s enough of a margin in your monthly budget to afford a motorcycle loan payment.
  3. Compare lenders. When you compare rates from multiple lenders, you’ll quickly see how different the offers can be. It’s a good idea to choose the lender that provides the lowest APR and fewest fees while making sure the monthly payments will fit within your budget.
  4. Apply for your loan. Once you’ve decided on a lender, all that’s left to do is submit your application. In general, you’ll have to provide your contact information, Social Security number, and some basic financial documentation. The lender may ask you for supporting documentation, such as a driver’s license and a W-2. You’ll likely receive a decision on your loan quickly, especially if you apply with an online lender.

What credit score do I need to get a motorcycle loan?

It’s possible to get a motorcycle loan with lower credit scores. Many personal loan lenders approve borrowers with poor to fair credit. But be aware that you’ll need good to excellent credit to qualify for the best rates and terms. That means your credit score must be at least 700 to qualify for the best offers.

What are typical repayment terms for motorcycle loans?

If you get a motorcycle loan through a dealership, your repayment term typically ranges from one to seven years. Personal loans generally have a shorter repayment term of one to five years. When your loan is stretched over a longer term, your payments will be lower. But more payments mean more interest charges, so the total amount you’ll pay may be much higher than what you’d pay with a shorter loan term. 

On the other hand, when your repayment period is shorter, your monthly payment will be higher in order to repay the loan faster. But you won’t pay as much in interest, which means your loan is typically less expensive with a shorter loan term than a longer one.

Visit Credible to compare personal loan rates for your motorcycle purchase.