A motorcycle is the perfect form of transportation for many people. Compared to cars, it is substantially more inexpensive, more simple to maintain, and capable of navigating even the most challenging traffic congestion.
Even though buying a motorcycle is a big investment, you do not have to let it break the bank if you follow these steps before applying for a loan.
Know Your Credit Score
The first thing you should do is check your credit report and score. This will let you know how likely it is that you will be able to qualify for a loan for a motorcycle or whether there are any errors in your report which can negatively impact your score. There are many ways to get free access to your credit report, so take advantage of these options!
Save A Down Payment
When applying for loans from traditional banks, lenders want proof that their borrowers have cash on hand before issuing them any type of loan.
Saving for a down payment is the most important thing you can do when purchasing a motorcycle. It doesn’t matter how much you love riding or your budget—if you do not have enough saved up, it is unlikely that any lender will be willing to lend you money. Most lenders require at least 5% of the total cost of your bike as a down payment before they even consider lending you money.
Shop Around For Financing
In addition to finding the best rate, you also need to know what options you have if you can’t make your monthly payments or if something affects your ability to pay—such as losing a job or having a medical emergency.
The lender should be willing to work with you and help figure out how much money they will give you so that it fits within your budget. They should also let you know what would happen if there were an issue with making payments and how they could help resolve the situation for the borrower to keep their motorcycle.
Lower Your Debt-To-Income Ratio
To qualify for a loan for motorcycle, you need to lower your debt-to-income ratio. To do this, you will have to pay off some of your other debts or find other sources of income that do not require paying high-interest rates.
What is a debt-to-income ratio? It is the percentage of the money you spend on all types of debt (mortgage, student loans, car payments) compared to your monthly income.
Improve Your Credit Score
The best way to improve your credit score is by making sure that you are paying on time and keeping balances low. For example, if you want to apply for a motorcycle loan, you must have a good credit score so that lenders will trust that they will get their money back.
Make Timely Payments To Existing Creditors
Making timely payments to existing creditors is also a positive step you can take. Make sure you are paying more than the minimum, and pay off your credit cards as quickly as possible. If you currently have debt, pay it off—your credit report must reflect this by showing no outstanding debt.
Prepare For The Loan Application Process
Now that you have a better sense of what it takes to qualify for a motorcycle loan, it is time to start preparing for the application process. Here are some tips:
- Prepare a list of all your assets and liabilities so that you can accurately fill out the loan application.
- Be prepared to explain any gaps in employment history.
- Know what you want to buy and be able to explain why.
- Have all the paperwork ready when you enter the dealership or bank; they will want proof of income, identification, etc.
- When they run your credit check, follow up with them immediately if there is something incorrect on your report, like old accounts or collections showing as open/paid off when they are not
- Get pre-approved. Before even stepping foot in the dealership, it is always best to get pre-approved for financing at least six months ahead of time. This way, you know exactly what your monthly payments will be and can plan accordingly. Also, make sure that whatever interest rate they give you is competitive compared with others on the market so that when it is time to buy your bike, there won’t be any surprises or unexpected costs coming up later down the road.
- Lastly, shop around for rates outside of dealerships.
Buying a bike can be exciting, but it is also an investment that requires careful planning. However, with the right information and preparation, you will be able to get the financing you need without breaking the bank!
Frank is an energetic salesman. On his free days, he spends his time writing and reading about financial plans and educational loans to help the parents and the next generation gain more insight about multiple educational opportunities.