If you’re in the market for a new or used motorcycle, a personal loan may be a great option for financing your purchase. Personal loans are a popular choice because borrowers can customize the loan to their individual needs. But there are a few different kinds of loans to consider, and each type offers its own benefits.
Before taking on the long-term responsibility of a loan, it’s important to shop around and compare rates and terms. Taking a little bit of time to do some research beforehand can solve potential headaches later on.
What is an unsecured motorcycle loan?
A secured loan is one where the lender requires collateral. To receive the loan, you have to put up something of value to ensure the loan is repaid. Usually the motorcycle itself will act as collateral, but cars and homes can also be used to secure the loan.
Understandably, some people feel uncomfortable with signing on to a secured loan and potentially risking their home or transportation if they fail to make payments. Because of this, many borrowers choose to pursue an unsecured loan.
Unsecured loans don’t require collateral, making them a popular choice for many would-be motorcyclists. However, the lack of collateral means unsecured loans usually have a higher interest rate than secured loans, which means the total amount you’ll pay back will be higher.
Unsecured loans also require borrowers to have a good credit history. If lenders provide a loan without collateral, they want to ensure they’re dealing with someone who is financially responsible. Although unsecured loans are a little harder to qualify for, they’re often a great option for buying a motorcycle.
Personal loans are one of the most popular kinds of unsecured loans, because they can be tailored to fit the needs of the borrower. Since traditional motorcycle financing may require a down payment, a personal loan may be used for a down payment, or you can finance 100% of the motorcycle with a personal loan.
How unsecured motorcycle loans work
- A personal loan is entirely based on your history of credit usage and ability to repay the loan. If you have a great credit history and a verifiable source of income the best rates will be available to you.
- Once approved, your loan is funded and deposited into your bank account. You can then take these funds and act as a cash buyer when negotiating with the motorcycle dealer or private party.
- Unlike a home equity loan or line of credit, an unsecured personal loan will not use your motorcycle or any other assets as collateral.
Where can I get an unsecured motorcycle loan?
Auto and motorcycle dealerships will usually have financing options available to potential purchasers. But these dealerships do not always have the best loan rates available for motorcycles. Careful borrowers should check out other lending opportunities before signing on to dealership financing.
Traditional lenders like banks and credit unions are another common way to finance a motorcycle purchase. These lenders offer a wide range of options for personal loans that can be adjusted to the borrower. Usually, the better the borrower’s credit, the more personal loan options they have.
Online lenders are the third option for getting a personal loan. Many borrows choose online financing companies because they offer better borrowing rates and have more flexibility for borrowers to pay the loan back at their own speed.
Whatever option you decide is right for you, make sure to take a close look at the Annual Percentage Rate, or APR. A loan’s APR will determine how much the lender charges you annually for borrowing. Taking a close look at your monthly budget and ability to pay will determine if the personal loan’s APR will match your lifestyle.
An unsecured personal loan is a great option to finance your motorcycle, since it comes with a fixed rate, a set payment schedule, and no prepayment penalties. You can make extra payments as you pay back the loan, which will go toward the principal and reduce the overall interest paid. Just make sure to compare rates before choosing a lender.