The major factor determining how you get approved for motorcycle financing is your credit score. Because most financing sources categorize a motorcycle purchase as a higher-risk purchase, both credit requirements and interest rates tend to be more restrictive. While dealership and traditional bank financing are good options for those with healthy credit scores, individuals with a short credit history or low credit scores may find a sub-prime lender their only option.

Credit Matters

The first step in getting approved for motorcycle financing is to check your credit report. The Fair Credit Reporting Act requires each of the three credit reporting agencies to provide you with a free credit report every 12 months. Request copies of your report from each agency and review them all to ensure information is correct and up to date. Pay particular attention to your credit score. According to Consumerfed.org, a good credit score is 700 or higher, while a score under 600 indicates a high level of risk to a lending institution. If your credit is not where it should be, taking some time to improve it can significantly increase your chances of getting motorcycle financing. Pay bills on time, keep low balances on credit cards and pay off debt. Individuals with little or no credit history should work to establish a good credit history by applying for one credit card that you use and pay off every month. As the credit card company reports your on-time payments to credit bureaus, you will establish a good credit history. A co-signor with a good credit history may also increase your chances of loan approval.

Financing Options

General financing options include dealer financing, bank or credit union financing and third party private loan financing. Dealer financing can be a standard, fixed-payment installment loan or private-label credit card financing. Be careful with private-label credit card financing. While this type of financing may allow you to purchase additional items such as clothing or accessories along with the motorcycle, the card issuer has the option to change the terms associated with the card at any time. Bank or credit union financing may be more difficult to get, as these institutions are generally more wary when it comes to financing recreational purchases. This is due to a higher rate of default with these types of loans. Third-party private loan financing options run the range from companies such as Capital One Auto Financing that target buyers with healthy credit scores to those only offering services for sub-prime loans. When investigating financing options, check a number of sources and ask questions before committing to a loan. Get information on interest rates, repayment terms, fees, and down payment requirements. If you are looking at dealer financing, make sure you know if the financing is standard or through a credit card.

Application Process

Regardless of the financing option, the application process is generally the same. You need to provide personal and financial information about yourself and information about the motorcycle you intend to purchase. The financial institution reviews this information, looking specifically for things such as how long you have been with your current employer and at your current residence. This information helps the institution determine stability. Then the lender requests a credit report from at least one of the credit bureaus and makes a determination on approval or denial of your loan application.

Source:

Consumerfed.org: Consumer Understanding of Credit Scores

CycleTrader.com: Motorcycle Loans and Financing

MotorcycleFinancingGuide.com: Motorcycle Financing Tips

More Information:

AnnualCreditReport.com: Order Annual Free Credit Report

Motorcycle.com: Shopping For Your Motorcycle Loan