Just because you can do something doesn’t mean that you should. Almost anyone with a motorcycle loan has the option to refinance at some point. A motorcycle loanis a personal loan, so the “refi” approach means taking out a second loan with better terms and using the proceeds to pay off the first loan. This article will cover the “why” and “how” of doing that.
When considering refinancing a motorcycle loan, a factor to remember is that bikes depreciate quickly. Larger bikes can go 50,000 miles if they get regular maintenance, but sport bikes begin deteriorating after 20,000 miles. The average motorcycle loan is 36 to 60 months. Do the math. Will you still be paying for the bike long after you stop riding it?
This is where the debate between “could” and “should” becomes relevant. Taking out a second loan will make it more difficult to sell the bike if you want to do that. Keeping it too long could make it worthless as a trade-in. A better option might be to use your current motorcycle as a down payment and finance a brand-new one.
Refinancing could be a great option if your motorcycle is in good shape, and you want to keep it for the foreseeable future. At that point, you need to consider whether to impact your credit score and credit history because both will be affected by a decision to refinance.
The original loan you got to buy your motorcycle may be a standard unsecured personal loan or could be a secured motorcycle loan which is similar to an auto loan. Larger dealerships often have financing departments that can help you buy a more expensive motorcycle. Less expensive and used bikes are typically purchased with personal loans or cash.
Refinancing is different. Lenders don’t offer secured loans on motorcycles that are already depreciating, so you’ll need a personal loan to pay off the original loan. You can find personal loans through a bank, credit union, or online lender. To apply, you’ll need the following:
- Valid driver’s license or other state-issued identification document
- Proof of employment and income
- Bank routing and account numbers
You don’t need a copy of your credit report, but it doesn’t hurt to get one. While you’re at it, check your credit score. The lender will review both. Know what’s on the report before the potential lender reviews it because they may have questions about some of the items it contains.
As we stated earlier, this really isn’t a question of whether you can get refinancing – it's if you should. If you choose this route, you’ll likely find lenders that will work with you. Gather the necessary documents, do your homework on lenders, and compare rates and terms. You might also want to check the book value on your bike to see if refinancing makes sense.
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