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If you're struggling financially and would like to speak to someone for free financial advice, information and assistance you can call the Financial Counsellors hotline on 1800 007 007 (open from 9:30am to 4pm, Monday to Friday). If you are suffering financial problems related to the coronavirus pandemic you may be eligible for additional support.
⚠️ Warning about Borrowing
Do you really need a loan today?*
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
- For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
- Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
- If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94
The Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.
* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.
How do bad credit bike loans work?
A bad credit bike loan is a type of personal loan that allows customers to borrow the funds they need to purchase a motorbike. They then repay the money they have borrowed, plus any interest that accrues on the loan amount over a term that can range from one to seven years, though many lenders offer maximum terms of two or three years.
For customers with poor credit histories, these loans tend to attract higher interest rates and fees than loans offered to borrowers with good credit. These fees may include the maximum establishment, monthly and default fees, as well as the highest interest rate as allowed by the Australian Securities and Investment Commission (ASIC).
In many cases, finance borrowers are required to offer their motorbike as security for the loan. Secured finance usually increases the chance of approval and may lower the interest rate offered to customers with bad credit ratings.
Unsecured financing for bad credit 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 for customers who satisfy all the relevant lending criteria.
Smaller finance options available for bike loans
What to consider when comparing bad credit bike loans
While buying a motorbike is usually significantly cheaper than buying a car, a new bike will still be quite an expensive purchase. With this in mind, it’s highly advisable to shop around and compare a range of bad credit bike loans before choosing one.
Before comparing bike loans, consider just how soon the bike is needed. For customers with bad credit, it's important to carefully consider whether there is any time to improve their credit scores prior to submitting an application. For customers who do not necessarily need to buy a bike right away, it might be worth waiting and taking some steps to raise their credit score and therefore improve their chances of securing a better finance deal.
For those ready to apply for finance now, make sure to consider the following factors when comparing bad credit bike loans:
- The interest rate. Even a seemingly minor difference in the interest rates of two loans can have a huge impact on the total amount customers 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 a customer chooses a payday loan, the government has capped charges at a maximum 20% (of the loan amount) establishment fee and 4% ongoing monthly fee. Please, however, note that payday loans are not ideal finance solutions.
- Comparison rate. The comparison rate is calculated by taking into account the interest rate and fees that apply to the loan. Comparison rates give a better idea of the total cost of a loan, so make sure to check it out when comparing loan options.
- Loan terms. How long will customers have to repay the money they borrow? Be wary of short loan terms, they often require steep repayments that borrowers may struggle to afford. On the flip side, although dividing the loan into smaller repayment amounts spread across a longer time period may seem easier on their budget, the loan could end up costing them a lot more in the end.
- Repayment amount and schedule. What is the minimum repayment amount and how often will borrowers be required to pay it? This amount should realistically fit into the current budget of anyone looking to take out a bike loan. It’s also worth considering whether they will be able to make extra repayments penalty free and pay the loan off ahead of schedule if they come into some extra cash.
- Insurance requirements. If the lender accepts an applicant's motorbike as collateral for the loan, they may be required to purchase adequate motorbike insurance cover before their application will be approved. They will need to remember to include this cost in their 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:
- Disreputable lenders. Bad credit financing is notorious for attracting lenders who engage in some pretty unscrupulous lending practices. Be especially wary of any lender who claims not to check credit scores, as it is a requirement for all responsible lenders to check credit scores prior to lending, even if they do cater for bad credit customers. Do your research beforehand to make sure any lender you choose is properly licensed and has a reputation for being honest and trustworthy.
- High rates and fees. Rates and fees on payday loans are high but there are rules in place so be sure to check your lender is not charging you more than ASIC allows. Also, look at what you would be charged if you are late on a payment or if you default on the loan altogether.
- Borrowing too much. All prospective applicants ought to consider their finances carefully prior to submitting an application. Over-borrowing will lead to high repayments, and a higher loan cost. Applicants who are unsure as to whether they can afford a loan based on their current budget should perhaps work to improving their situation prior to applying for finance.
- Not checking the loan contract. All applicants should make sure that they double- and triple-check any loan contract before signing it. Things to look out for include: the interest rate, loan fees, regular repayment amount and total loan cost before signing on the dotted line.
- Impact on credit score. Every loan application shows up on credit reports. While lenders might not consider credit history, applying for lots of loans within a short period can have a negative impact on your credit score in the future.
Loan application checklist
All bad credit loan applicants should bear in mind that loan applications, and rejections show up on their credit records and multiple applications during a short period of time act as a red flag for lenders. Therefore, it is important for all prospective applicants that they strive to include all of the relevant information in order to minimise chances of rejection and subsequent further damage to their credit histories.
Applicants ought to find a loan that matches all of their borrowing needs and for which they are eligible to apply, then keep the following checklist in mind when preparing their application:
- Honesty. Applicants should avoid lying on their credit applications. Lenders assess all credit applications they receive, so if potential borrowers don’t disclose their credit problems, a lender will almost definitely find a history of missed repayments and defaults and will dismiss the application.
- Credit scores. It’s free and easy to check your credit score and get a copy of your credit report. This allows potential credit borrowers to see what information a lender will be able to access when assessing an application. This gives applicants a chance to take whatever steps they can to repair their credit file.
- Demonstrate a capacity to save. Before approving anyone for a bad credit bike loan, a lender will request copies of recent bank statements to assess a borrower's capacity to repay the loan. If customers can show that they have the capacity to save money – i.e. that they don't spend all of their income each week – this will help a lender view an application in a more positive light. Ensuring that an account isn’t overdrawn and doesn’t have any direct debit dishonour fees will also be beneficial.
- Other loans and credit cards. Similar to the above point, the lender will check the repayment history on other loans and credit cards that their finance applicants have. Being able to show a consistent history of making on-time repayments, and of making more than the minimum monthly repayment, will stand any prospective applicant in good stead.
How much does a bad credit bike loan cost?
How much a bike loan for bad credit borrowers will depend on a number of factors, including the applicant's income, their credit rating and the loan security (the bike, in most cases). Below is an example of how much someone might expect to pay on a loan of $3,000 with poor credit if they leave the bike as security on the loan.
Laura is approved for a medium personal loan of $3,000 to be repaid over a period of 5 years. Laura is allocated a 35% annual interest rate. She also has to pay $10 per month in fees. If she meets her payments on time, her repayments will be:
Establishment fee: $400
Monthly fees (total): $600
Monthly repayments (x60 payments): $116
Total to be repaid (including all fees): $7,388
Total interest paid on principal (including all fees): $4,388*
*Please note that this example is fictional and should not be taken as an accurate representation of what an individual applicant can expect to be offered by a lender. The calculations are merely a representation of how much someone would pay over a certain period of time with this particular interest rate and these particular fees.
If a bad credit bike loan isn't the best fit for your finances, there are some other options. One example to consider is the possibility of using a credit card to pay for a new bike. Customers may be able to take advantage of a 0% p.a. introductory interest rate offer, which could make paying for a bike with a credit card a more affordable option than a high interest loan, in some cases. For those considering paying for a bike with plastic, there are a number of factors to consider.
Another option for avoiding bad credit borrowing, as mentioned earlier, is to wait until your credit file is in better 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.
Questions about bad credit bike loans answered
Will a lender assess my employment history when I apply?
Yes. Earning a regular income and being able to show a steady history of employment is a requirement of many lenders. However, some lenders will accept applicants on Centrelink payments. If you’re still in the probationary period at your current job, you’ll most likely find it difficult 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.