Obtaining financing for a motorcycle is similar, but not identical, to getting financing for a car. The basic process is the same, and similar checklists are used to determine creditworthiness, but there are fewer lenders willing to extend credit to motorcycle consumers.
Things You'll Need
- Three to four pay stubs
- Two years of W2s
- Tax returns
- Proof of insurance
How to Get Approved for Motorcycle Financing
Pull a copy of your credit report. You'll need to self-judge your own credit to determine whether you'll be a good risk. (See resources for finding a free copy.) Look for the following negative attributes: charge-offs, delinquencies, judgments, maxed-out credit lines and excessive open accounts (usually more than four revolving lines of credit). Attempt to clear up negative credit before seeking financing.
Understand the differences between an auto loan and motorcycle loan. While the most glaring difference is that there are fewer motorcycle financing options, there can be differences in the terms and features of motorcycle loans as well. Lenders might want to finance 100 percent of a motorcycle, but it's best to put money down for two reasons: first, your payments will be lower, and second, motorcycles depreciate faster than cars -- they can only sustain upward of 50,000 miles or so. You should be prepared to spend more for insurance on a motorcycle--especially if your bike is considered "high-risk." A high-risk bike has a low windshield, a seat that forces the rider to lean forward and foot pegs set farther back on the bike -- all characteristics that increase aerodynamics and therefore speed. And motorcycle loans often do not extend past 48 months -- unlike cars that can be carried out to 72. Income calculations (DIR ratios) are often the same, and most car and motorcycle finance companies allow a DIR to exceed 50% -- usually the max cutoff for mortgages and non-vehicle loans.
Avoid dealership financing if possible. You might find a motorcycle at a dealership, but try not to be persuaded to use its lenders--unless they have the best deals. Cheaper financing can more often be found elsewhere. Start at local banks and community credit unions, which might not provide motorcycle financing but can offer recommendations.
Obtain insurance. (See resources to begin this search.) You'll have a variety of choices of agents and programs, but to obtain any sort of financing, you'll need proof of insurance. Your agent will provide you with a "deck page"--a document proving your coverage, the dates during which it applies and the price. Bring this with you to your lender.
Review all options before deciding on a length of loan (term) and rate. Auto financing often allows a DIR (debt to income) ratio--the amount of monthly obligations versus your monthly revenue--to be much higher than other types of loans (sometimes as high as 70-80 percent). This can lead to taking on too large a payment. Do your own income calculations to make sure you can afford it. For example, if you earn $2,000 per month (before taxes), and your total monthly obligations (including a proposed motorcycle payment) are $800, your DIR ratio is 40 percent -- a fair ratio. Try to keep your DIR under 50 percent.
Research potential lenders on the Better Business Bureau's website. See resources for a link. You'll want to make sure you're dealing with a reputable and ethical lender when you agree to a loan agreement. With a solid credit score (at least 660), a fair DIR ratio, acceptable motorcycle insurance and a viable (fully inspected) motorcycle, you should qualify for a solid motorcycle loan.
Tips & Warnings
- Avoid aggressive lenders who attempt to coerce you into unfavorable motorcycle loans. As a general rule, stay away from lenders that pursue you--either in person or on the phone. Do your own research and come to a decision based on your needs.