Unsecured motorcycle loans: how they work and where to find them

With motorcycle loans you can finance a new or used bicycle, similar to a car loan. You can borrow from the manufacturer or dealer, and some banks offer motorcycle loans. If you don’t opt ​​for traditional financing, you can also consider unsecured personal loans to finance your motorcycle.

Motorcycle loans differ from standard car loans, and bicycle loans generally have higher rates. Compare lenders carefully to avoid excessive fees and get the best deal.

How do unsecured motorcycle loans work?

A motorcycle loan will work differently depending on whether you choose a secured or unsecured loan. Secured motorcycle loans work in the same way as car loans. The motorcycle is the collateral; If you do not pay, your bicycle can be repossessed.

Unsecured motorcycle loans are like – or often are – personal loans. They usually have higher rates, but you won’t automatically lose your ride if you don’t pay back the loan.

Unsecured motorcycle loan

Unsecured motorcycle loans are based on your credit history and ability to repay. You may qualify for a low rate if you have a good credit score and a low debt-to-income ratio. Once approved, your loan will be funded and deposited into your bank account. You then act as a cash buyer in negotiations with the motorcycle dealer or private party.

You repay your loan in the same way as a secured loan. But unlike a secured loan, the title is entirely in your name and there are several consequences if you default.

Secured motorcycle loan

A secured motorcycle loan differs from a loan for the purchase of a car, but works in the same way. Once you find the lender you’ll be working with, the lender will transfer the money to the seller and file a lien on your collateral – usually the motorcycle itself. You then pay your lender until your motorcycle is paid off.

Of course, the motorcycle does not have to be collateral for a secured loan. There are other ways to secure your loan at a low interest rate, but they may not be financially sound. After all, you run the risk of losing that collateral – such as your house or savings account – if you cannot repay what you borrowed.

Where can I get an unsecured motorcycle loan?

If you’re looking for a motorcycle loan, you have a number of options. Each of these has its pros and cons, so explore them all and find the one that suits you best.

Banks and credit unions

Traditional lenders such as banks and credit unions are another common way to finance a motorcycle purchase. They offer a variety of flexible loan options, and you will generally have more products to choose from if you have a strong credit score.

Online lenders

Many borrowers choose online financing companies because they offer competitive rates and flexible loan terms. Some online lenders offer specific secured motorcycle loans, or you can consider an unsecured personal loan from an online lender.

5 steps to get the best motorcycle loan

Here are a few things to consider to get the best motorcycle loan possible.

1. Shop around for different loan options

Start by looking at local credit unions, banks and online lenders. See who offers unsecured loan options, specifically ones that can be used for a motorcycle. It may be useful to compare unsecured and secured options to see which have the better rates and terms. For secure options, you can also consult manufacturers and dealers; some may offer financing.

2. Check your credit

Know your credit score and what your credit profile looks like. You can check this at AnnualCreditReport.com. The higher your credit score, the more loan options you have available and the better interest rates you will be offered.

3. Get prequalified

Many lenders offer a prequalification process. These often don’t include a hard credit check, so they won’t hurt your credit score. Often you only need to provide basic information such as your name, address, income and credit history.

4. Compare

You can often find different rates through prequalification and then compare them. See which lender has the best conditions for your situation and pay attention to any costs.

5. Choose your loan and apply for it

Once you have determined which loan suits you best, you can apply for the loan in full. At that point, lenders may request bank statements, pay stubs, tax papers, IDs and other information to process the application, if they haven’t already done so. If you are approved for an unsecured loan, the money will likely go directly to you.

Frequently Asked Questions

• What is the difference between a motorcycle loan and a personal loan?

  A motorcycle loan generally works like a car loan: a lender requires you to pledge the motorcycle as collateral so that he or she can take the motorcycle if you can’t pay. By comparison, most personal loans are unsecured, meaning if you use one to buy a motorcycle, a lender can’t take your bike unless they have permission from the court.

• Can you get a loan for a used motorcycle?

  With a personal loan you can buy almost anything, including used motorcycles. You can also get a secured motorcycle loan for a used bike from certain manufacturers and other lenders.

• What is the average interest rate for a motorcycle loan?

  According to JD Power, the average interest rate for a motorcycle loan is 3.95% for borrowers with average credit scores. But the rate you receive may be higher or lower depending on several factors, such as your credit score, repayment terms, the lender you apply to, and whether you choose an unsecured or secured motorcycle loan.

• Can you get a motorcycle loan with bad credit?

  Yes, while it may be more difficult to qualify with bad credit, it is possible because some lenders have more lenient minimum credit score requirements. Lenders may also be more willing to approve you with bad credit if you apply for a secured motorcycle because they can take the bike away if you don’t repay the loan. However, keep in mind that if a lender approves you for a loan with bad credit, you may have to pay high interest and fees.