Most lenders consider a car a necessity item and thus work with borrowers as much as possible to help them get what they need. A motorcycle, on the other hand, rates as a luxury item. This means your bank and other lenders may set the borrowing bar a bit higher. As is true for all loans, you need to fix credit problems before borrowing and shop around for the best rates. A substantial down payment helps too. You'll also need a realistic budget and a co-signer if your credit is poor. Keep in mind that it's often easier to finance a new bike than a used one.
Boost Your Credit Score
No matter what type of loan you want, the better your credit score, the better your odds of approval. Check your credit report before you apply for a loan and fix any errors you find. Pay down any existing loans or credit card balances as much as you can to reduce your debt-to-income ratio before you go motorcycle shopping. Pay off collection accounts and make payments on time. Lenders regard a credit score of 650 as only fair. You'll need to hit that number or higher if you want to have any chance of getting a motorcycle loan.
Explore Your Options
Different lenders have different lending criteria, so shop around. Doing so may improve both your interest rate and your odds of approval. Banks and credit unions that offer vehicle financing may offer motorcycle loans. You can also finance a motorcycle purchase through a dealer or manufacturer. Manufacturers and dealers typically try harder to approve financing than banks. While banks make money only off the loan's interest, motorcycle dealers and manufacturers make money off the loan interest and the sale of the bike. Although they may charge higher interest rates than the bank, dealers and manufacturers have more incentive to approve financing.
Dial It Back
In some cases, the amount you borrow impacts your odds of approval. The bike of your dreams and the bike you can afford could be worlds apart. Set a realistic budget and stick to it when shopping. Potential lenders will look at your income as well as your outstanding debt. If you try to borrow more than you can realistically pay back, they'll figure it out and deny your loan. Having a smaller bike with fewer bells and whistles is better than not having one at all.
Go New vs. Used
While a used motorcycle purchase helps keep the budget in check, it is sometimes easier to finance a new bike than a used one. There are two reasons for this. One is that used bikes are often sold privately. A guy selling his used ride on Craigslist isn't going to offer you financing, so your only financing option in this case is a bank loan. If your bank or credit union turns you down, you won't have dealer or manufacturer financing on which to fall back.
Used motorcycles are also harder to finance due to their value. If you default on a motorcycle loan, the lender will likely repossess the vehicle and sell it to recover their loss. The newer the motorcycle, the higher its resale value. Many lenders consider financing a used motorcycle just too risky. Even dealers typically offer financing only on new units. Financing a used bike isn't impossible, but it can be tricky.
Save Your Pennies
Saving enough money to pay for a brand-new motorcycle is a daunting task. Thankfully, it's also one that you need not undertake. If saving enough to pay for a new set of wheels is impossible, instead save a nice down payment. A down payment reduces the amount you have to borrow and increases your loan approval odds.
Find a Friend
If you're just not in a position to get approved for a motorcycle loan, a co-signer can help. As is true for other loans, a co-signer agrees to pay your motorcycle loan if you default for any reason. A co-signer with good credit and adequate income can make it possible for you to get a loan that your lender would otherwise deny. Your co-signer is legally obligated to pay the loan if you can't, however, so don't ask someone to co-sign for you unless you're positive you can repay the debt.
Michelle earned her accounting degree summa cum laude and has extensive experience in business management and accounting. Entrepreneurship is in her blood, and her work focuses on helping small businesses successfully compete in a big market. Michelle also knows the value of a dollar and enjoys helping readers understand how best to maximize their money and enjoy a healthy financial life. Her work appears Chron's small business site. She has also worked on small business blogs for a national insurance chain.