Whether you apply for a loan to buy a car or a motorcycle, you’d no doubt want a lower interest rate and affordable loan terms. Motorcycles are usually cheaper than cars, and many lenders offer unsecured loans to people looking to buy one. The lack of security means that lenders could lose their money if the applicant defaults on the loan. Lenders counter this risk by scrutinising the application more thoroughly and generally requiring applicants to have a higher than average credit score.
How do lenders decide the credit score needed to finance a motorcycle?
The typical loan application requires potential borrowers to submit documentation of their income and, sometimes, their savings. In addition, lenders will typically request permission to access the applicant’s credit history. Applicants who don’t have any history of defaulting on past debt, including utility bills and credit cards, are more likely to have a credit score in the ‘very good’ or ‘excellent’ range. For lenders, such a credit score suggests a higher chance of recovering the loan amount in due time from the borrower. If your credit score is ‘average’ or ‘fair’, but you haven’t missed paying any bills, your application could still get a favourable assessment, depending on the lender. Although you may want to investigate why your credit score sits in this range and consider working towards boosting it.
A lower credit score can result in lenders combing through your application more thoroughly and perhaps even asking for further documents. You may be able to discuss your credit situation with them - for instance, if there are incidents listed on your credit report that you have managed to resolve. In some cases, lenders may recommend taking steps to build up your credit score before applying for a motorcycle loan.
What if I don’t have a sufficient credit score for a motorcycle loan?
One or more lenders may decide that you don’t have the necessary credit score to finance a motorcycle. While this can happen because you do have a poor credit score, you may want to check the kinds of loans the lender offers. If they offer both unsecured and secured loans, you may qualify for a secured loan even with a lower credit score. In a secured loan, the lender has the option of repossessing your motorcycle if you can’t keep up with the payments, and they’ve given you the required reminders and warnings. Secured loans could be more affordable as well, compared to unsecured loans.
Also, you may want to consider checking if there are specialist motorcycle financiers you can apply to, as lenders who offer general vehicle loans may not have well-defined criteria for motorcycle loans. However, beware of the interest rates with these loans.
If you are willing to put off buying the motorcycle for some time, you can work on improving your credit score and then apply for the loan when you are in a better position. Apart from strengthening your loan application, boosting your credit score can also help you qualify for better interest rates. You can contact the credit reporting bureau and request a copy of your credit report, which you can get for free at least once a year. Reviewing the credit report can tell you about the actions needed to build up your credit score.
How to Finance a Motorcycle
For the motorcycle enthusiast there’s nothing like hitting the open road on two wheels to explore all the great rides that Australia has to offer.
Its hard to replicate the sense of freedom that a bike provides, and, more so than ever, Australians are looking to purchase a motorcycle not only because they are great alternative means of transport but also because of the extra excitement and thrill they provide to the rider.
With the number of registered motorcycles in Australia having almost doubled to 807,000 in the past 10 years, there is an increasing demand for bike loans and bike finance.
Whilst a motorbike can provide a rush of adrenaline, you definitely don’t want to abandon rational thought when buying a motorcycle or financing your bike.
So what is the best way to get a bike loan to finance your next motorcycle purchase?
Stick to your budget
1. Select the right type of motorcycle that’s within your budget
Don’t get caught up in the emotion of purchasing a motorbike when you get to the showroom. Do some research online before hand. The fact that your reading this article is a good indication that you’re going about your purchase the right way.
Assess what the primary use of the motorbike will be - daily ride into work, weekend cruiser, touring, on-road or off-road, or even track work.
Decide whether you’ll buy a new motorcycle or used one.
A new bike is generally more expensive at the outset but you’ll get the latest and greatest in terms of styling, performance, and technology, a manufacturer’s warranty and even some discounted financing opportunities.
With a used bike you can make significant savings on the purchase price, but you need to be conscious of the existing wear and tear on the bike from the previous owner(s) and how well its been maintained.
Set a budget and stick to it.
Check your Credit Report
2. Check your credit report and know your credit score
As an asset class, motorcycles are considered to be a higher risk by banks and credit providers compared to car loans. So a clean credit report and solid credit score are essential to not only secure motorcycle finance but to achieve the best bike loan rate possible.
Order a copy of your credit report to get an appreciation of some of the information your bank or finance company will review when you apply for bike finance.
Ensuring that your credit report is accurate, up-to-date, and contains no information irregularities is very important.
You can generally write to the credit reporting bureau to get certain personal information corrected.
However, in some cases where you have provided inaccurate information on loan applications in the past or have a poor credit history, you may be restricted from updating this information on your file.
Credit providers will consider the degree to which you are already in debt, so if you have any current personal loans that can be paid out or credit cards that can paid down and cancelled, do this before you apply for your bike finance. If you’re a home owner, make sure your mortgage repayments are up-to-date and always made on time.
Remember if you have a clean credit file and good credit score (say above 700) the banks will most likely approve your motorcycle loan application and give you a good interest rate.
Do your Research
3. Research the best bike finance options online
You don’t want to shot gun loan applications to multiple lenders if you can avoid it because this negatively impacts your credit score and, in some cases, may prevent you from even getting bike finance.
Most sources of motorcycle finance provide comprehensive details about the loan products available to them online and also enable you to apply online as well. So do your research well and truly before you start shopping and only apply once you’ve narrowed your choice down to one or two lenders.
Sources of motorcycle finance include bike dealerships, auction houses, banks & credit unions, finance companies, and finance brokers.
Don’t be afraid to ask questions about the loan your dealership, finance broker or bank offers, such as whether the interest rate is fixed or variable or whether you can vary the term to suit your monthly loan repayment budget. You should also ask about what options are available to insure your new bike, and get a quote to compare with your own insurer. If the provider is giving you a good deal on your insurance its probably a good indicator of the deal you’re getting on your loan.
Always remember, if it sounds too good to be true, it probably is.
Choose the right lender
4. What Banks or Finance Companies provide motorcycle finance?
In general, most of the banks, credit unions and building societies do not have a specific motorbike loan product - customers generally finance their purchase using an unsecured personal loan product.
The problem with this is that the loan assessment criteria for an unsecured personal loan is substantially higher as the bank doesn't have security over the motorcycle. This makes buying a motor bike far harder for those buyers who are not home owners or buyers, have limited job stability or financial assets.
There are a limited number of finance companies that specialise in providing a secured loan for motorcycles.
In most cases, the relevant loan products are distributed via finance brokers due to the additional work required for originating a loan.
AFS specialises in financing all makes and models of motorcycles and scooters. If you decide you need finance for a motor bike, you can deal directly with AFS' sales team or you can choose to use a finance broker who can arrange the loan on your behalf and do all the paperwork for you.
Hit the throttle with a low rate bike loan from AFS. Ask your finance broker to arrange one for you or deal directly with AFS.
Loan Product Types
In Australia, there are effectively two (2) loan products available to finance a motorcycle or motor bike.
- Unsecured Personal Loan: Provided by mainstream lenders such as banks, credit unions and building societies. Banks often apply higher hurdle rates for customers to obtain an unsecured personal loan product but the benefit is security is not required. As a consequence, you may have to pay a higher interest rate.
- Secured Car Loan: Only a select number of finance companies provide finance for motorcycles & scooters - one of those being AFS. Whilst some may provide credit, the terms of the loan may be restrictive particularly when it comes to deposit where 10-30% of the purchase price is often required to proceed with the loan. AFS is one lender that tries to minimise the amount of deposit you require. We structure the loan to suit your needs and you can even finance your insurance and accessories as part of the loan.
Bike Finance Essentials
Interest Rates from:
8.97% p.a.* Fixed Rate
10.44% p.a.^ Comparison Rate
- Borrow between $5,000 to $70,000 for a new or used motorbike or scooter
- A great interest rate: Compare us to your bank
- Fixed interest rate for the life of the loan
- Pay as frequently as you like: weekly, fortnightly or monthly
- Choose a term from one to five years.
- Make extra payments when you like
- Ability to purchase a motorbike from a dealer, auction house or private seller
- No restriction on the age of the bike you want to purchase
* Interest rate (Annual Percentage Rate/APR) is only applicable for new goods that have not been pre-owned, where the amount borrowed is between $35,000 - $70,000 and where the applicant owns or is buying a property and has an established good credit history. Finance subject to approval, including the application of applicable lending criteria. Terms and Conditions apply. Fees and Charges are payable. Interest rates vary depending on the applicant's credit score and associated credit risks. Credit provider is Automotive Financial Services Pty Limited – Australian credit licence 383762. ^Comparison rate for AFS Loan Contract and Mortgage is calculated on a loan amount of $30,000 secured over a term of 5 years based on monthly repayments. WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.
What to avoid when financing your motorbike
Predatory Lenders
Avoid using predatory fringe lenders or pay-day lenders that are demanding with their terms and charge extremely high interest rates, often above twenty percent.
Credit Cards
Another bad idea is buying your motorbike on your credit card.
If you’re lucky enough to have a high enough card limit, this method of financing could be very tempting, especially as there is no loan application required and no credit check.
However, the sky-high interest rates should be enough to stop you in your tracks and override the convenience, particularly when you take into account the nasty penalties you'll get stuck with if you get behind on your credit card payments.
Don't put it on house
Probably the most expensive mistake is putting your motorbike on your home loan – whilst the banks love it you end up paying through your nose because you’re putting a short term asset into a long term debt. For a $10,000 bike where you think you’re only paying between 5-6%, the fact that you’re aggregating the debt into a 25 or 30 year mortgage means that the extra interest you end up paying often equates to well over 30% interest on the amount you’ve borrowed for the motorcycle.
Longer Loan Term could be problematic
We all know that cars depreciate significantly once they are driven off the lot. Unfortunately motorcycles are no different – in fact, they tend to depreciate even quicker than cars.
So while a longer loan term might help you lower your monthly loan repayments, it could mean that at some point in the future you owe more on the motorcycle than it’s actually worth.
If you have the ability to put some cash towards the purchase, or opt for a bike that would allow you to make payments within your budget but under a shorter loan term, that will be a much better option in the long run.
More Questions?
Can I use a finance broker to arrange a motorcycle loan?
Yes. The AFS Bike Loan product is used extensively by finance brokers as many of mainstream banks and credit providers will often only lend on homes, cars, personal loans and credit cards.
Also if you were to arrange a loan through your bank, the relevant product is generally an unsecured personal loan which is often more expensive than their standard secured loan product.
Please note that if you use a finance broker you may be charged an origination fee which is separate to the AFS Fees & Charges but can also be financed as part of your loan. If you use a broker, you should ask for a copy of their credit guide and obtain a credit quote from them.
Can I arrange finance even though I'm still looking for my motorbike?
Yes. AFS understands that finding the right motorcycle can take time, particularly if you're after a specific model.
However, once you've found the motorcycle of your dreams, the last thing you want to be doing is racing around trying to secure finance.
At AFS, we can arrange a conditional approval, valid for 30 days, that enables you to shop with confidence. And even if you run out of time, we can simply refresh your approval because we want you to buy the motorbike you love.
Finally, it’s time to have fun!
Once you’ve found the right bike, it’s time to hit the road and enjoy yourself
But if you’re still worried about motorcycle financing, AFS is here to help!
Contact us so we can answer all of your questions.
Benefits of financing your motorcycle through AFS.
- Secured Loan with fixed interest rate for the term of the loan;
- No restriction on type of motor bike;
- No restriction on age of motor bike;
- Ability to finance bike options & accessories;
- Generally no deposit required;
- Ability to purchase through a dealer, auction house or private seller;
- Ability to finance your comprehensive insurance as part of the loan; and
- Arrange direct with AFS or through your finance broker.