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Motorcycle Loans Bad Credit - Motorcycle Loans & Bad Credit

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Credit rating is the crucial element of any financing we do. It determines how much we can borrow, how long we can borrow it, and how much interest we’ll need to pay. With bad credit, we’ll have a more difficult time finding that loan, and when we do, we’ll borrow less and pay more.

This is the nature of the beast, and it’s even harsher when we’re financing an item that financial institutions consider to be specialized and a luxury, such as motorcycle. Another negative factor is that motorcycle loans typically default at a higher rate than car loans.

A common question among lenders is, can I get a motorcycle loan from the same place you get a car loan. Technically, yes, but for the reasons presented above, not always. Some banks refuse to process motorcycle loans at all, and some refuse to do bad credit loans even when they do them for cars.

Differences between Car Loans and Motorcycle Loans

• Not all financial institutions who handle loans handle motorcycle loans.

• Most motorcycle loans are a revolving credit line rather than a traditional installment loan.

• With traditional installment loans, rates for motorcycles are closer to other vehicles.

• Revolving credit lines typically have adjustable interest rates.

• Motorcycle loans typically require lower down payments or no down payment at all.

How to Get a Motorcycle Loan with Bad Credit

1. Have the appropriate mindset. Most borrowers with bad credit act out of desperation. Don’t be that person. Having bad credit doesn’t mean that you can’t make perceptive business decisions.

2. Start the process by knowing your credit score and information. Do this by requesting/purchasing the report from each of the three major reporting agencies (Equifax, Experian, and TransUnion).

Note: The Fair Credit Reporting Act (FCRA) requires all nationwide reporting agencies to provide you a free report upon request once per year. Call 1-877-322-8338, or visit annualcreditreport.com.

Tip: If you’ve already received your free reports and need them again within that 12-month window, you’ll need to pay. Rather than pay for each individually, use a service that provides all three for one low fee.

3. Analyze your credit reports, and pay particular attention to discrepancies. The reporting agencies will correct errors. Pay off any overdue debts, and request that creditors update your credit status.

Tip: You can only have so much outstanding credit, so focus on potential debt as well as actual debt. If you have credit cards you no longer use, closing those accounts will help a great deal.

4. Save some money. This step is optional, but it’s much easier to get a bad credit motorcycle loan when you have a sizable down payment (~10% of the cost).

5. Shop around for the loan. You don’t need specifics on the bike, just the amount you want to borrow. Don’t settle for the first lender to say yes either. In a best-case scenario, you can use the first yes as leverage for a better rate on the second yes.

Note: Can I walk into Harley Davidson shop and finance my vehicle? Yes, motorcycle dealers finance motorcycles just like car dealerships do.

Tip: However, that doesn’t mean you should do it, especially when you have bad credit. Shop for the loan yourself. Start with your bank or credit union. You can always give the dealer the opportunity to beat the rate, but it’s very rare that they’d be able to.

Tip: Use the Internet to shop for your loan. Internet-based lenders are common and reputable, and it wouldn’t be a surprise if you found a better rate online than locally.

Tip: Consider using a cosigner if possible. This will lower rates dramatically, and help you to improve your credit faster.

6. Shop for your bike, and at least consider buying used. Buying a used bike will allow you to get more out of your budget, which could be important if you expected it to be higher.

Note: If a used bike is a possibility, bring this up during the loan process. It could have an effect on the loan, and some lenders might not allow it at all.

Things You Should Know About Your Bad Credit Motorcycle Loan

Most financial institutions offer motorcycle loans for 12-36 months, but they can be as long as 72 months. However, don’t expect a period that long with bad credit, and you’re best off choosing the smallest period that you can afford. Keep in mind that if your credit continues to improve, it may be possible for you to refinance at some point during the loan. Ask about that, and ask these questions as well:

1. Is the rate fixed or variable?

Tip: While a variable rate may be lower now, you run the risk of higher monthly payments if the market changes.

2. Are there any other factors that could affect the rate?

3. What are the administrative fees?

4. What is the total cost of the loan (borrowed money plus interest plus fees)?

5. What happens when a loan payment is 1 day, 30 days, and 60 days late?

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