How to get a motorcycle loanMay 29, 2022
If you are looking to buy a motorcycle, taking out a motorcycle loan can be a great way to help spread the initial cost to make it more manageable. However, before you look into applying for a loan, you need to establish which type you need.
What Type of Loan Do You Need?
When it comes to motorcycle loans there are two types on offer, secured or unsecured.
A secured loan is where the money borrowed is secured to an asset, known as collateral. If you default on the loan repayments, the lender can repossess the asset to cover the remaining balance owed.
Dealerships or bike manufacturers most commonly offer secured loans; when you buy a brand new motorcycle from them, that motorcycle will be used as collateral for the loan.
Secured loans can typically offer a higher limit for lending, lower interest rate and better approval rates for those with lower credit scores – this is because there is greater security for the lender should you fail to fulfill the loan agreement.
An unsecured loan is the type you often see offered by a traditional lender such as a bank or reputable financial institution. As they aren’t ‘secured’ to an asset, an unsecured loan gives a broader range of options for what you can finance.
For example, you can use them to purchase a brand new bike but also a pre-owned or classic motorcycle, fund maintenance, repairs or upgrades to a current bike, and even help towards general running costs and new riding equipment.
Unsecured loans mean there is a greater risk for the lender, and as such, borrowing limits can be lower, interest rates higher and a better credit score is needed to qualify for one.
Both types of loans have their benefits, which is best for you depends on your personal circumstances. The most important thing to consider with any loan is if the regular repayments amounts and length of the loan term is affordable for you.
How To Get a Loan
Seeing if you pre-qualify for a loan is a simple and easy process. Most lenders can tell you what types of loan, rates, and terms you could qualify for within a few minutes by taking some basic details. All lenders have their own criteria for applicants, but most will ask for the following:
- Your financial and credit history
- Current income and expenses
- The value of the collateral (if applying for a secured loan)
- Your state of residence
It’s worth noting that a secured loan will need an asset valuation to be conducted; this can add more time to the approval process. Whereas an unsecured loan just requires a credit score check which can be completed within minutes.
Once you are approved for a loan, due diligence from the lender has been completed, and you have checked and signed the loan agreement, the funds can be with you by the next working day.
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