Whether you want extra cash for a specific goal or are just looking to revamp your budget with inflation and rising costs, lowering your motorcycle payments can help open up some extra cash month to month – but how?
The only way to lower the monthly payment on a motorcycle loan is to change your loan terms, either by modifying your loan with your current lender or refinancing your loan. For most people, refinancing will be the better option, because you have more leverage when changing loan providers and can usually get more favorable loan terms that way. The exception would be if you have particularly bad credit or are otherwise not a good candidate for refinance.
Read on to learn how motorcycle financing and refinancing works, what makes someone a good candidate for refinance, and the steps to start your refinance and secure a lower motorcycle payment.
In this guide, we’ll cover:
How motorcycle loans work
How refinancing can lower a monthly motorcycle payment
What determines motorcycle loan APRs (Annual Percentage Rates)
How to make yourself a good refinance candidate
The steps to refinancing a motorcycle
A motorcycle loan is a secured loan used to help finance a motorcycle.
A motorcycle loan works the same way as a car loan. A financial institution (the lender) pays for your motorcycle, and you in turn repay them in monthly installments with an additional fee, interest, for the convenience of borrowing money.
Your motorcycle is considered collateral, and if for any reason you cannot repay the lender, your motorcycle will be taken away (and any money you already paid will not be returned). The term “secured” refers to the use of collateral.
Motorcycle loans have a principal, which is the price of the motorcycle, plus any taxes and fees, minus any down payment you make. This principal is the base of your loan, and then interest will be applied to that principal. The interest is calculated using a motorcycle loan Annual Percentage Rate, or APR, which is based off of market rates and off of your personal financial situation.
In short: Refinancing can lower your payment through securing a lower interest rate, changing the loan term, or both.
When you refinance, you are paying one loan off with another loan. The new lender pays off the old loan and you repay the new lender in monthly installments. The new loan will have a different APR and repayment plan, ideally with better terms for your unique financial situation.
By securing a lower APR, you can save money every month.
You can also accelerate your payment plan, which will allow you to pay your loan off faster and save money (lower APRs are traditionally offered to loans with shorter repayment plans).
Or you can refinance a motorcycle loan to a longer repayment period and cut your payments every month.
Refinancing your motorcycle is the best way to lower your monthly motorcycle payment and save money on your motorcycle loan.
Motorcycle loan APRs are determined based on:
Market factors
Credit score and credit history
Income
Loan term
These factors are important to understand if you want to lower your monthly motorcycle payment.
The economy’s performance will help dictate what APR you are offered.
Interest rates are set by the Federal Open Market Committee. If they decide that spending needs to be encouraged, they will lower interest rates. In the past several years, interest rates have varied pretty drastically, so whether or not you can save by securing a lower interest rate may depend on when you took out your motorcycle loan.
The biggest factor for your motorcycle loan APR (that you can control) is your credit score.
Lenders use them to determine how likely you are to pay back a loan. Your credit score looks at the following categories:
Payment History. Are your payments consistently full and on time?
Amounts Owed. How much money do you owe on your accounts?
Credit History Length. How old are your accounts?
Credit Mix. Do you have a healthy mix of different types of accounts and debts?
New Credit. Do you have a lot of hard inquiries on your credit? Do you have some brand new debts?
All of these factors are looked at when determining your credit score (and therefore your motorcycle loan APR). The higher your credit score is, the better motorcycle loan APR you will be offered.
Lenders will also look specifically at your income to determine your motorcycle loan APR.
Your income compared to the amount of debt you are in will indicate to lenders if you will be able to repay your loans.
The longer the loan term is, the higher the interest rate you are offered will be.
Lenders will often offer lower rates for shorter terms. This means that if you select a longer lease period, you are not only paying a higher car loan interest rate, but you are paying it for a longer period of time. You will ultimately end up paying a lot more money overall by selecting a long repayment period.
The key factors that make you a good candidate for refinance are:
You credit score and history
Your income
Your down payment (original down payment or ability to add more at time of refinance)
Your desired loan term
Your vehicle
The age/time left on your current loan
To start, getting a preliminary quote to see how much money you could potentially save requires no commitment or hard credit check.
Once you’re ready to get serious about refinancing, you’ll want to:
Review your credit
Gather your documents
Get quotes from multiple lenders
Compare offers
Choose your best offer and start saving
Make sure your credit score is looking good. It is so important to have a good credit score when you are refinancing. That is how you can make sure you save the most money. If your credit score isn’t great, wait a few months before refinancing and work on improving your score. Focusing on making on time payments and paying down debt can have a huge impact on your score.
Gather all of your documents, including your original loan documents. You will need a photo ID, your vehicle’s information (may include the bill of sale, VIN number, make, model, and year of your car), proof of income and financial history, proof of residence, and proof of insurance. Scan them and upload them so you are ready to go when the time comes to apply.
You should aim to apply to 3-5 lenders so that you have enough offers to compare in a short period of time, to avoid multiple inquiries on your credit. When you choose to refinance with Auto Approve, we shop around for you and save you the hassle. We have relationships with lenders across the country, which means we can find you the best deals and save you the most money.
You want to look at the motorcycle loan APR, the repayment period, the prepayment penalties, and the customer service ratings when making your decision. When the deals come in, the experts at Auto Approve can help walk you through your options to help you find the best loan for you.
Once you decide what loan is right for you, it’s just a matter of signing on the dotted line! We can even help you with all of the paperwork (including the DMV!) That’s it! Refinancing really is so simple when you choose Auto Approve.
Refinancing your motorcycle is the best way to lower your monthly motorcycle payments.
And when you choose Auto Approve for your motorcycle refinance, you’re in good hands. Auto Approve has a 96% would-recommend rating on LendingTree as well as an A+ rating from Better Business Bureau. So don’t wait any longer – get your free quote today!