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.
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.
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.
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.