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What credit score do you need to finance a motorcycle?

What credit score do you need to finance a motorcycle?

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.  

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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