What you need to know about refinancing a motorcycle loan

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Ask a Lender
October 17, 2017 | Updated October 18, 2017


Key Points

Steps to refinance a motorcycle loan

  • Compare lenders
  • Get your motorcycle appraised
  • Apply for a new loan
  • Pay off your old loan

If you have a motorcycle loan, you may be wondering if there’s a way to save some money in interest, or a way to lower your monthly payment. Good news: You may be able to accomplish both of those goals by refinancing your motorcycle loan.

Refinancing a motorcycle loan

There are two main benefits to refinancing your motorcycle loan. If interest rates have dropped or you’ve improved your credit score, you may be able to refinance into a loan with a lower interest rate, saving you money in interest over the life of the loan. If your goal is to lower your monthly payment, you may be able to refinance the remaining balance of your loan, regardless of whether the interest rate is lower. When refinancing to lower your monthly payments, you’ll often end up extending your loan term as well. Careful, though, this could negate your savings because you’ll pay more in interest.

Here are the steps to refinancing your motorcycle loan:

  1. Compare lenders. Your first step should be to compare lenders. If your goal is to lower your interest rate, talk to multiple lenders until you find one that can offer a lower rate.
  2. Get an appraisal. Some lenders require you to appraise your motorcycle to ensure they’re not lending you more money than the motorcycle is worth. Some lenders will hire an appraisal themselves, while others may require you to do so.
  3. Apply for the loan. Once you have everything you need in place, it’s time to apply for the refinance loan. Be sure to fill out the loan application carefully and thoroughly to avoid any problems or delays in the underwriting process. You may need to provide such information as your Social Security number; the make, model and VIN of your motorcycle; and details of your current loan.
  4. Pay off your old loan. The proceeds from your new loan will pay off your existing motorcycle loan. If your existing loan happens to have a prepayment penalty, you’ll have to pay it once you use the new loan to pay it off.

Note that if you only owe a relatively low amount on your motorcycle, it may be difficult to refinance, as the lender will make less money on the new loan.

Another point of caution: Lenders may charge fees for the new loan, and there’s a chance that the cost of the new loan could negate the financial savings of lowering your interest rate or monthly payment. Run the numbers and make sure, even when all the fees are taken into account, that you’ll still end up benefitting financially by refinancing your motorcycle loan.

Loan options

Specialized loans designed specifically for motorcycle refinancing are relatively uncommon, but they do exist. If you have difficulty obtaining such a loan, however, there are some other options available.

  • Personal loan. An unsecured personal loan is an option to pay off your motorcycle loan. Though the interest rate on an unsecured loan may be greater than the rate on your motorcycle loan, taking out a new loan for the remaining balance and stretching it over a new loan term could lower your monthly payment.
  • Home equity line of credit (HELOC). HELOCs are a revolving line of credit, similar to credit cards, that are backed by the equity in your house. Because the line is backed by collateral, there’s a good chance you can obtain a lower interest rate, making it a viable option for paying off your current motorcycle loan. Note that if you default on the loan, you risk losing your house.
  • Credit card. Generally speaking, a credit card is probably not the best option for refinancing a motorcycle loan. There’s an exception, however. If the credit card has an introductory rate of one to two years with zero percent interest, it could make sense to pay off your loan with the credit card. This only makes sense, however, if you can pay off the balance within the zero interest period. If not, you’ll likely be hit with higher interest rates than you had previously.

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