Have a bad credit history but need a motorbike loan? Here’s how to find the financing you need.
A bad credit history can make it very difficult for you to borrow money. So if you’re looking for a loan to buy a motorbike, you may have trouble finding the finance you need.
The good news is that there are plenty of Australian lenders who offer bad-credit bike loans. Here’s how you can find a suitable lender and lock in the right loan for your needs.
How do bad-credit bike loans work?
A bad-credit bike loan is a type of personal loan that allows you to borrow the funds you need to purchase a motorbike. You then repay the money you borrow plus any interest that accrues on your loan amount over a term that can range from one to seven years, though many lenders offer maximum terms of two or three years. Because of your poor credit history, these loans tend to attract higher interest rates and fees than loans offered to borrowers with good credit.
In many cases, you’ll be required to offer your motorbike as security for the loan. Unsecured financing is available in certain circumstances, but this means you’ll need to deal with a wide range of restrictions including a higher interest rate and typically very short loan terms.
Bad-credit bike loans are available with fixed or variable interest rates. Many lenders will only offer loans of up to $5,000, but larger loans of up to $10,000 may be available if you can satisfy all the relevant lending criteria.
Smaller amounts you could borrow for you bike loan
What to consider when comparing bad-credit bike loans
While buying a motorbike is usually significantly cheaper than buying a car, your new bike will still be quite an expensive purchase. With this in mind, it’s essential that you shop around and compare a range of bad-credit bike loans before choosing one. Make sure to consider the following factors during your comparison:
- The interest rate. Even a seemingly minor difference in the interest rates of two loans can have a huge impact on the total amount you will need to repay over the full loan term. Shop around for a competitive interest rate and remember to compare fixed-rate loans with other fixed-rate loans, and variable-rate loans with other variable-rate loans, to get an accurate idea of how each option stacks up against the competition.
- Loan fees. The next thing to look out for is the fees that are attached to the loan, remembering that bad-credit loans tend to have higher charges than other loans. Look for the establishment fee and ongoing fee amounts, plus any charges for late repayments. If you choose a payday loan, the government has capped charges at a maximum 20% (of the loan amount) establishment fee and 4% ongoing monthly fee.
- Comparison rate. The comparison rate is calculated by taking into account the interest rate and fees that apply to the loan. It gives you a better idea of the total cost of a loan, so make sure to check it out when comparing your options.
- Loan terms. How long will you have to repay the money you borrow? Be wary of short loan terms that require you to make steep repayments that you may struggle to afford. On the flipside, although dividing your loan into smaller repayment amounts spread across a longer time period may seem easier on your budget, the loan could end up costing you a whole lot more in the end.
- Repayment amount and schedule. What is the minimum repayment amount and how often will you be required to pay it? Is this amount affordable for you? It’s also worth considering whether you will be able to make extra repayments and pay the loan off ahead of schedule if you come into some extra cash.
- Insurance requirements. If the lender accepts your motorbike as collateral for the loan, you may be required to purchase adequate motorbike insurance cover before your application will be approved. You’ll need to remember to include this cost in your budget calculations.
What to look out for
There are a few traps and pitfalls to be wary of when shopping around for a bad-credit bike loan. These include:
- Dodgy lenders. Bad-credit financing is notorious for attracting dodgy lenders who engage in some pretty unscrupulous lending practices. Do your research beforehand to make sure any lender you choose is properly licensed and has a reputation for being honest and trustworthy.
- Borrowing too much. Don’t let the dream of cruising around on your brand-new bike distract you from your financial reality. If you’re at all uncertain about whether or not you can afford a loan, that’s a pretty good sign it’s not right for you.
- Not checking the loan contract. Once again, it’s important to put your dreams of owning a new bike to the side for one moment and focus on reality. Make sure you double- and triple-check any loan contract before you sign it. Check the interest rate, loan fees, regular repayment amount and total loan cost before you sign on the dotted line.
Tips for getting your application approved
Applying for financing when you have bad credit can be a difficult and frustrating process. However, remember that applications for credit show up in your credit file, and multiple applications during a short period of time act as a red flag for lenders, so don’t get too trigger-happy and apply for several loans at once.
Instead, find a loan that matches all your borrowing needs and for which you’re eligible to apply, then keep the following tips in mind when preparing your application:
- Be honest. Don’t try to lie to a lender about your credit history. Lenders assess all credit applications they receive, so if you don’t disclose your credit problems and the lender immediately finds your history of missed repayments and defaults, don’t expect to get your application approved.
- Check your credit file before you apply. It’s free and easy to check your credit score and access a copy of your credit file. This allows you to see what information a lender will be able to access when assessing your application, and gives you the perfect chance to take whatever steps you can to repair your credit file.
- Demonstrate your capacity to save. Before approving you for a bad-credit bike loan, a lender will request copies of recent banking statements to assess your capacity to repay the loan. If you can show that you have the capacity to save money – in other words, that you don’t spend all of your income each week – this will help the lender view your application in a positive light. Ensuring that your account isn’t overdrawn and doesn’t have any direct debit dishonour fees will also be very beneficial.
- Other loans and credit cards. Similar to the above point, the lender will check your repayment history on other loans and credit cards you have. Being able to show a consistent history of making on-time repayments, and of making more than the minimum monthly repayment, will stand you in good stead.
If a bad-credit bike loan isn't the best fit for your finances, take a look at some other options. One example is to use a credit card to pay for your new bike. If you can take advantage of a 0% p.a. introductory interest rate offer, paying for a bike with your credit card could actually be an affordable option for you. Check out finder.com.au's guide to paying for a car with a credit card for some useful tips on how you might be able to purchase your bike with plastic.
Another option to help you avoid bad-credit borrowing is simply to wait until your credit file is back in good shape. There are plenty of things you can do to improve your credit score, including disputing any incorrect listings, and in the interim you can keep putting money aside in a savings account so that the amount you eventually need to borrow (if any) will be reduced.
FAQs about bad-credit bike loans
Will a lender assess my employment history when I apply?
Yes. Earning a regular income will boost your chances of approval, as will being able to show a steady history of employment. If you’re still in the probationary period at your current job, you’ll most likely find it hard to get approved.
Are there lenders that offer no-credit-check loans?
You should be very wary of lenders offering these types of loans, since a credit check is an essential part of the responsible lending process.
Can I still get a loan if I’m on Centrelink?
Yes, it’s still possible to qualify for a loan if you receive Centrelink payments. However, those payments must represent no more than a specified maximum percentage (specified by the lender) of your total income.