Credit Scores for a Motorcycle Loan
NEW YORK, May 30, 2022 (Newswire.com) - iQuanti: If you're ready to hit the open road on two wheels, don't feel like your credit score has to hold you back. While requirements vary from lender to lender, there is no standard set minimum credit score to be eligible for a motorcycle loan.
How does my credit score affect a motorcycle loan?
Like any type of loan, the better your credit score, the better interest rate and terms you can expect to be eligible for. But with motorcycle loans, depending on the loan, credit score may not be the only significant factor.
Credit score and secured loans
Sometimes those who don't have a credit score that meet a certain threshold will only be eligible for secured loans. Secured loans involve collateral that the loan is secured to, if the borrower fails to pay back the loan, the lender repossesses the collateral. In many secured motorcycle loans, the motorcycle being financed is used as collateral.
Credit score can also affect how much of a down payment is required, if any. Generally speaking those with lower credit scores will be required to meet a higher down payment than those with lower credit scores.
The condition, age, and value of the vehicle also play a factor in determining the interest rate on the loan. In many cases for secured loans, older and/or less valuable motorcycles have higher interest rates than those that are newer or expected to increase in value over time.
Credit score and unsecured loans
When it comes to unsecured motorcycle loans, credit score is one of the primary factors in determining the interest rate. Unsecured loans don't require collateral, and therefore often come with higher interest rates but more convenience.
Getting pre-approved for an unsecured loan is often a quick and simple process that doesn't impact your credit score. This is also a great way to see where you stand with a given lender based on your credit score and explore your options with them risk-free. Similarly, the application process is simpler and faster than secured loans because with no collateral involved, there is no need to conduct some sort of asset valuation or appraisal.
Can I build credit with a motorcycle loan?
Yes, so long as the lender reports your activity to a credit bureau and you make all of your payments on time or early, you will be able to increase your credit score with a motorcycle loan. It is generally not advisable to take out a loan solely for the purpose of building credit, however it's always a good idea to make timely payments on loans so that your credit score improves.
The bottom line
Every lender has different credit requirements for loans, and generally speaking those with better credit scores will enjoy more options including secured loans with lower interest rates and unsecured loans with no collateral. Be sure to explore your options and if possible, see if you prequalify for a loan before applying so that you can have minimal impact on your credit score as you look for your next loan.
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Source: iQuanti, Inc.