How to Finance a Motorcycle With Bad Credit

Being prepared can help you get the motorcycle you really want.
Image Credit: Joe Raedle/Getty Images News/Getty Images

A bad credit report doesn't mean you cannot finance that motorcycle you want to buy, but it does make it harder. Financing companies look at your overall credit score, whether or not you have late payments, amounts discharged or a bankruptcy on your credit report. The paradox of having bad credit is that you need to get credit and make payments on time to reestablish your credit and increase your score. While it may seem as if it's an impossible task, it is possible to find bad credit lenders who will work with you if you take the time to shop for the best loan.

Step 1

Verify your credit rating before you go shopping for a motorcycle and loan. You are allowed to receive a free copy of your credit report at least once annually as authorized by federal law. Review your report carefully to ensure it does not contain misstated information. The three major bureaus -- Equifax, Transunion and Experian -- created a site where you can access this information online at www.annualcreditreport.com. If you find incorrect information posted by any of the three agencies, write a letter to dispute the wrong items listed on your report, as they are required to remove it.

Step 2

Save up a down payment of 10 percent or more of the total purchase price of the motorcycle before looking for motorcycle lenders. The more money you can put on a down payment up front results in lower monthly payments, a shorter term loan and less paid on interest over the course of the loan. This is especially important for buyers with bad credit because interest rates are based on your credit score. The higher your credit score, the lower your interest rate. A large down payment also helps you find a loan more easily, since lenders prefer to loan smaller amounts to borrowers with bad credit.

Step 3

Calculate the maximum payment amount you can pay based on your income and budget. This gives you an idea of the overall price range of your motorcycle when coupled with your down payment. Look for a dealer or motorcycle lender experienced with buyers who have bad credit. Take time to research this thoroughly and compare the various interest rates between at least three lenders or dealers or more.

Step 4

Ask a family member or friend with good credit to cosign on your loan. While this can help you get the motorcycle you want, by cosigning for you, the friend or family member is agreeing to be fully responsible for the loan if you default. Weigh the benefits and risks carefully before you ask someone else to take on this responsibility.

Tip

Get preapproved for a loan before you go to the motorcycle dealer. When you have a preapproved loan -- and a down payment -- you have a stronger position from which to negotiate the price of the motorcycle.

Talk to your own bank or credit union. Even though you have bad credit, if you have been dealing with a financial institution for a long time, they may still be willing to give you a motorcycle loan, especially if you agree to set up your payments on an automatic withdrawal basis. You can also search for loans online.

Be realistic about the type of motorcycle you can afford when you have bad credit. You might want a top-of-the-line model, but it's much more difficult to get a loan for a higher amount. You may have to choose a less-expensive motorcycle to qualify for financing.

Warning

Some motorcycle dealers offer to sell you loan insurance -- especially to people with bad credit -- and other expensive options. Be firm, but polite with the dealer and avoid buying unnecessary add-ons that boost your loan amount higher.

Make all of your loan payments on time to improve your credit rating. Do not be pressured into buying something that is beyond your budget. Take the time to shop around until you find a loan that fits your monthly budget and income.

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