Unsecured motorcycle loans: How they work & where to find them

Motorcycle loans allow you to finance a new or used bike — similar to an auto loan. You can borrow from the manufacturer or dealership, and some banks also offer motorcycle loans. If you aren’t going with traditional financing, you may also look into unsecured personal loans to finance your motorcycle.

However, motorcycle loans and unsecured personal loans tend to have higher rates than auto loans. Compare lenders carefully to avoid excessive fees and get the best deal.

How do unsecured motorcycle loans work?

Unsecured motorcycle loans are based on your credit history and ability to repay. You may qualify for a low rate if you have a great credit score and a low debt-to-income ratio. Once approved, your loan is funded and deposited into your bank account. You then act as a cash buyer when negotiating with the motorcycle dealer or private seller.

Unsecured motorcycle loans are like — and often are — personal loans. They tend to have higher rates, but unlike a secured loan, the title will be entirely in your name and there will be different consequences if you default.

Secured vs. unsecured motorcycles loans

Unlike an unsecured motorcycle loan, a secured loan requires collateral. Once you find the lender you’re going to work with, the lender will transfer the money to the seller and file a lien on your collateral — typically the motorcycle itself. A secured motorcycle loan may also come with a lower rate since it’s less risky for the lender.

That said, the motorcycle doesn’t have to be collateral on a secured loan. There are other ways to secure your loan to get a low rate, but they may not be financially sound. After all, you would risk losing that collateral — like your house or savings account — if you cannot repay what you borrow.

The main difference between an unsecured and secured motorcycle loan is that a lender can seize your collateral if you default on a secured loan. With an unsecured loan, the lender has to pursue alternate routes to repossession.

Where can I get an unsecured motorcycle loan?

If you’re looking to get a motorcycle loan, you have a few options. Each has pros and cons, so explore them all and find the one that works best for you.

Banks and credit unions

Traditional lenders like banks and credit unions are another common way to finance a motorcycle purchase. They offer a variety of flexible loan options, and you will generally have more products to choose from if you have a strong credit score.

Online lenders

Many borrowers select online financing companies because they offer competitive rates and flexible loan terms. Some online lenders will offer specific secured motorcycle loans, or you can consider an unsecured personal loan from an online lender.

5 steps to get the best motorcycle loan

Consider your loan options, review your credit score and compare multiple lenders to find the best motorcycle loan for your finances.

1. Shop your loan options 

Start by looking at local credit unions, banks and online lenders for unsecured loan options, specifically ones that can be used for a motorcycle. It might make sense to compare unsecured and secured options to see which have the better rates and terms. For secured options, you can also check manufacturers and dealerships — some may offer financing.

2. Review your credit

Know your credit score and what your credit profile looks like. You can check it for free each week through AnnualCreditReport.com. The higher your credit score, the more loan options you will have available and the better interest rates you will be offered.

3. Get prequalified 

Many lenders will offer a prequalification process. These often do not include a hard credit check, so they will not hurt your credit score. To complete an application, you will provide basic details, like your name, address, income and credit history.

4. Compare lenders

You can often find different rates through prequalification and then compare them. Check which lender has the best terms for your situation, and keep an eye out for any fees.

5. Choose your loan and apply

Once you’ve determined which loan works the best for you, apply to the loan fully. At that point, lenders may ask for bank statements, pay stubs, tax paperwork, IDs and other information to process the application if they have not already. If you are approved for an unsecured loan, the funds will likely go directly to you.

Unsecured motorcycle loans for bad credit

Even if you have bad credit, it’s possible to qualify for an unsecured motorcycle loan. Some lenders offer bad credit personal loans — loans with low minimum credit score requirements.

Lenders may also be more willing to approve you with bad credit if you apply for a secured motorcycle loan because they can take the bike if you fail to repay the loan. Keep in mind, though, that if a lender approves you for a loan with bad credit, you may have to pay a higher interest rate and fees.

Next steps

Purchasing a motorcycle with an unsecured loan could be a smart choice if you prefer not to risk losing collateral. That said, before you take out an unsecured motorcycle loan, weigh the pros and cons versus a secured one.

If you decide that an unsecured motorcycle loan is the right fit for you, compare rates and terms from several lenders, including banks and credit unions, to get the best deal for your finances.