Few things in life bring a sense of freedom as riding a motorcycle. Flying down the road with the wind in your hair, the roar of the motor in your ears, adrenaline pumping through your veins, and a wide grin on your face truly soothe the soul.
That freedom is an expensive investment, though.
According to PowerSportsGuide, the average cost of a new motorcycle in 2022 was around $16,000, and the average cost for the ever-popular Harley Davidson brand was $25,000.
Beginner and used motorcycles can be found for less, while custom-built bikes typically cost much more.
You have many options for financing the purchase of a new or used motorcycle, including dealer and manufacturer financing, or taking out a personal loan.
In many instances, a personal loan for a motorcycle might make more sense than other financing options.
Learn how motorcycle and personal loans work, five things to know about getting a personal loan, and some of the potential benefits and drawbacks of using a personal loan to buy a motorcycle.
How Does a Motorcycle Loan Work?
Motorcycle loans are a form of consumer lending that’s similar to buying a car.
Many traditional lenders, such as banks and credit unions, offer motorcycle loans, as do motorcycle dealerships and manufacturers.
Motorcycle loans are usually secured loans. They are backed by a physical asset, which is the motorcycle. If you fail to pay your loan, expect to have your bike repossessed.
Lenders also may only offer loans on new motorcycles, so buying a used bike might not be an option.
Below are three common methods used to finance the purchase of a motorcycle.
Dealership financing
Large motorcycle dealerships may offer financing options — it’s kind of a one-stop shop.
Consumers should be aware, however, that dealerships can inflate loan interest rates.
If you have decent credit, you likely can find a better rate elsewhere for your motorcycle loan.
Lender financing
This route includes traditional lenders such as banks and credit unions, as well as online lenders.
Credit unions typically offer well-qualified customers better rates than can be found through any other avenue of financing.
Manufacturer financing
Most major motorcycle manufacturers have partnerships in place with select financial institutions to offer financing options for motorcycles.
Compare rates and find the best personal loan for your individual needs.
Personal Loans for Motorcycles
Ask any motorcycle owner, and they’ll probably tell you that owning a motorcycle is a significant investment.
In addition to buying a bike, you’ll need to purchase a bunch of must-have safety gear, including a helmet, boots, eye protection, gloves, pants, and a jacket.
If you plan on riding on the dirt or off-road tracks, you’ll also need elbow and knee pads and maybe even a chest protector.
You can spend thousands more dollars on equipment upgrades and accessories for your bike.
Many consumers take out personal loans to finance the purchase of a motorcycle and all the accouterments that go with it.
Keep reading to learn more about the ins and outs of personal loans.
What’s a personal loan?
Personal loans are unsecured loans, which are a form of consumer financing that usually doesn’t require any type of collateral to secure the loan.
Banks, credit unions, and online lenders offer personal loans. Like most installment loans, you’ll have a set monthly payment, a fixed interest rate, and a firm end date for the loan to be paid in full.
You can use an installment loan calculator to figure out how much your payments would be on a personal loan.
How a personal loan for a motorcycle works
Lenders look at a variety of factors to qualify consumers for personal loans.
You’ll need to have a good (670-739) to fair (580-669) credit score, although having a very good (740-799) to excellent (800 and above) credit score will get you the best interest rates available on personal loans.
One good thing about a personal loan is you can use the money for anything, including a bike and all the gear needed to keep you safe and protected on the road.
How it’s different from a motorcycle loan
Motorcycle loans are just that — they must be used to purchase a motorcycle.
You’ll likely only be able to borrow the exact amount needed to secure the bike from the dealer or manufacturer.
With a personal loan, though, you can borrow enough to buy the motorcycle and anything else you need, provided you qualify.
Compare Motorcycle Loans and Personal Loans
Figuring out the best way to pay for a new motorcycle can be difficult. Here’s a side-by-side comparison between personal loans and motorcycle loans to help demystify your choices.
Motorcycle Loans vs. Personal Loans
Perhaps the best way to compare the two types of loans is to get prequalified with several lenders to see who is offering the best rates and loan terms that meet your expectations and budget.
What Do You Need to Get a Personal Loan for a Motorcycle?
Unlike a home mortgage, which can be an excruciating, time-consuming process to close, taking out a personal loan is a straightforward and simple process — at least for creditworthy borrowers.
Here’s what you’ll need to get a personal loan for a motorcycle in five easy steps:
Since lenders have different criteria that must be met when qualifying consumers for loans, it would be prudent to inquire with many different types of lenders to find the best loan terms and highest loan limits.
Why Choose a Personal Loan Over a Motorcycle Loan?
Some borrowers may find merit in both motorcycle loans and personal loans, and the option may come down to personal preference.
For others, there could be good reasons to choose a personal loan over a traditional motorcycle loan from a lender, dealership, or manufacturer.
Here are five reasons why personal loans may prove more beneficial than other types of financing to purchase your new motorcycle:
Lower interest rates than credit cards
You may have room on your credit cards, but average credit card interest rates are pushing 20%. Well-qualified borrowers could take out a personal loan with an interest rate that’s under 10%.
The difference in interest payments could save you several thousands of dollars over the life of the loan.
Private-party sale
Lenders may not fund the purchase of a used motorcycle from a private seller.
With a personal loan, you can use the money however you see fit once your loan is funded.
You don’t have money for a down payment
Traditional motorcycle loan lenders may require you to come up with a significant amount of money for a down payment.
You won’t have to come out of pocket at all if you take out a personal loan.
Unsecured loan
With an unsecured personal loan, you won’t have to have a physical asset stand as collateral for your loan.
If you ever run into financial problems, you won’t lose your motorcycle to your creditor.
Versatility
With a bank loan, you’ll only be able to borrow the exact amount needed to buy the motorcycle.
With a personal loan, though, you can use some of the money to purchase all your safety gear or invest in some aftermarket performance upgrades for your bike.
Pros and Cons of Using a Personal Loan for a Motorcycle
We’ve laid out some compelling reasons why taking out a personal loan to buy a motorcycle might be your best option, but there can be some potential drawbacks as well.
Here are some pros and cons of using a personal loan to buy your new motorcycle.
Get Prequalified for a Personal Loan
Anytime you apply for a new line of credit, the lender will do a hard pull on your credit to examine your credit and payment history and credit usage.
A hard inquiry (as opposed to a soft pull) shows up on your credit report and negatively impacts your overall credit score.
While this section of your credit report accounts for just 10% of your credit score, having too many hard inquiries in a short period of time will cause your score to drop a bit.
The best option is to prequalify with lenders through a soft pull and then move forward with a formal loan application once you’ve identified the lender that offers the most favorable terms.
FAQs
Below are some commonly asked questions about personal loans.
How much does it cost to take out a personal loan?
Loan origination fees, if there are any, vary by lender.
Some lenders have loan origination fees, while others don’t. That’s why it pays to shop around when looking for a personal loan.
How much can I borrow with a personal loan?
Loan limits are largely determined by the borrower’s credit score and income.
You can borrow as little as $7,500 to buy a used motorcycle or $30,000 for a new Harley.
Only borrow the minimum amount needed to secure your bike and gear, since every dollar you borrow will increase your overall debt load and lead to a higher monthly payment.
I’m a gig worker. Do I qualify for a personal loan?
As noted, the primary factors for securing a personal loan are creditworthiness and proof of income.
If you have excellent credit (800 and above) you might not even have to show proof of income.
Just be sure you can afford to absorb the payments into your freelance earnings.
