Can You Refinance Your Motorcycle Loan?

Taylor Medine is a staff writer at Forbes Advisor who demystifies complex money topics to help everyday people make more informed financial decisions. Over her nearly a decade of experience, Taylor's work has been published on Bankrate, Experian, Credit Karma, MarketWatch, The Balance and more.

Taylor Medine

Taylor MedineStaff Writer

Staff Writer

Colin BeresfordDeputy Editor, Personal and Business Loans

Colin Beresford is a writer and editor experienced in helping people make the best decisions with their money, whether it's buying a car or taking on a loan. He has written for Bloomberg, The Associated Press, NerdWallet, Car and Driver magazine, among many others covering various financial topics.

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Colin Beresford

Colin BeresfordDeputy Editor, Personal and Business Loans

Deputy Editor, Personal and Business Loans

Reviewed

Updated: Aug 14, 2023, 10:14am

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You can refinance a motorcycle loan to get lower interest rates and more favorable terms.

Whether you can—and should—refinance your motorcycle loan depends on your credit, how much your bike is worth and the existing loan’s remaining balance, among other factors. Although refinancing your motorcycle loan can save you money, it may not always be worth it. In some cases, it may result in a costlier loan.

As you consider refinancing your loan, keep in mind how you can qualify for the best possible rates and when it might not be worth it.

What Is Motorcycle Refinancing?

Motorcycle refinancing pays off your current loan and replaces it with another loan.
That new loan can have lower interest rates or a different term length, which could lower your monthly payments. It could also remove a co-signer from your loan.

Refinancing your motorcycle loan could be worthwhile in the following instances:

Your credit score has increased since you financed the motorcycle
Interest rates have dropped since you financed the motorcycle
You want to shorten or extend your loan term
You want to remove a co-signer or co-borrower from your loan

Your credit, your bike’s value and payment history on your existing loan can in part determine if you qualify for motorcycle refinancing. Keep in mind that lower interest rates aren’t guaranteed when you refinance your loan, and the best motorcycle loans generally come with interest rates at 8% and above.

Shopping around with different lenders can help you find more favorable terms and a lender with requirements you can meet.

How Refinancing a Motorcycle Works

Motorcycle loans can be refinanced with a secured loan or an unsecured personal loan. Secured loans are backed by your motorcycle, while unsecured loans don’t require any collateral.

The refinancing application process is similar for both secured or unsecured loans. Loan applications ask for personal details like your name, address and income. To verify this information, lenders may ask for your ID and pay stubs. A credit check is also usually performed to determine your creditworthiness and likelihood of paying the loan back.

If the loan is secured by your bike, the lender will compare the value of your bike to the amount you want to refinance. If you’re upside-down on your loan—you owe more on the bike than it’s worth—it can be harder to qualify for loan refinancing.

Once approved for loan refinancing, the new loan pays off your old loan and you start making payments on the new one.

How To Refinance a Motorcycle Loan

Generally, you’ll take these steps to refinance a motorcycle loan:

1. Review Eligibility Requirements

Requirements for loans can vary by lender, and below are some of the factors lenders will review to determine if you qualify.

Credit. Lenders may not list a minimum credit score to refinance motorcycles. However, having a good credit score (670 or higher on the FICO Score scale) can increase your odds of getting approved for a competitive interest rate.
Income. Stable income shows lenders you can keep up with monthly payments on your new loan. You may be asked to provide pay stubs to confirm your income.
Debt-to-income (DTI) ratio. Lenders review your DTI—which shows how much debt you have compared to your income—to determine if you can afford the payments for a new loan. Lenders look for a DTI of 36% or less, but they may work with applicants with a DTI of up to 49%.
Motorcycle equity. You may not qualify for loan refinancing if you have negative equity in the bike, meaning you owe more than it’s worth. However, some lenders may be willing to finance up to 110% of the motorcycle purchase price or appraised value.

2. Review Options From Many Lenders

Many types of lenders—including banks, credit unions, and financing companies—refinance motorcycles. Each lender may charge different rates and fees to process your loan, so shop around to compare rates, terms and fees so you can find the most affordable refinancing deal for your bike.

3. Determine If Refinancing Makes Financial Sense

Refinancing makes the most sense if you’re able to secure a lower interest rate on a new loan without extending your loan term. A lower rate can reduce your monthly payment while helping you save on interest.

You can also lower monthly payments with an extended loan term, but you’ll likely pay more in interest as a result. Plus, there’s a risk you could go upside down on your loan if the value of your bike decreases faster than you’re able to pay off the loan.

Be sure to review monthly costs, long-term costs and risks of different loan terms to figure out which loan refinance makes the most sense.

4. Prequalify and Compare Loan Options

You can prequalify for motorcycle refinancing from many lenders, allowing you to review preliminary offers without affecting your credit. Getting multiple offers is the best way to compare deals.

5. Apply for Refinancing

Once you’ve found a loan and lender that works for you, submit an application. If you’re approved and you sign the contract, your old loan will be paid off and you’ll begin repayment on your new loan.

Can You Refinance If You Have Negative Equity?

Qualifying for a new loan secured by your bike can be harder when you have negative equity on your motorcycle. It’s riskier for lenders to refinance a loan when the collateral—in this case, your bike—is worth less than the amount you’re borrowing. If you default when you have negative equity, the cost of the loan can exceed the value of the motorcycle.

If you’re unable to get a loan, making extra principal payments is one way to eliminate negative equity to qualify for refinancing. Another option could be refinancing a secured motorcycle loan with an unsecured personal loan. With an unsecured personal loan, your bike’s value and your equity wouldn’t be considered in the loan application.

Keep in mind that interest rates on unsecured loans may be higher than on secured loans. Having a credit score of 720 or higher can give you the best chance of getting a low rate on a loan.

Is Motorcycle Refinancing Worth It?

Motorcycle refinancing may be worth it if it helps you lower your payments or remove a co-signer. The best candidates for refinancing are borrowers who are able to secure lower rates on a new loan as this can result in both lower monthly payments and long-term interest savings. A refinancing calculator can help you calculate those savings.