Can I Refinance My Motorcycle Loan?

A motorcycle can get you where you need to go, but a motorcycle loan might bust your budget if your financial situation changes after you buy your bike. Fortunately, you can refinance a motorcycle just like you would a car.

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The motorcycle refinancing process isn’t that different from that of a car loan, and you get the same potential benefits, such as reduced interest rates and monthly payments. We'll explain how to refinance a motorcycle, when you might qualify and how it could help. 

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Key takeaways

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• Refinancing replaces your current motorcycle loan with one offering better terms, such as lower interest rates and monthly payments.
• Common reasons for refinancing include looking to reduce monthly payments, get out of bad loan terms or remove a cosigner.
• Lenders use your credit score, income, equity and debt-to-income ratio to determine your eligibility for refinancing.
• It’s best to refinance your motorcycle when your credit has improved and interest rates have dropped.

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Why refinance a motorcycle loan?

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Refinancing a motorcycle loan means ending your existing loan and replacing it with one that offers better terms. Common reasons people refinance include:

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• Lower interest rates: Motorcycle loans often come with higher interest rates than car loans. If your current rate is making your monthly payments a financial strain, refinancing can help by replacing your current loan with one at a lower rate. This can lower your monthly payments and help you save money.
• Shorter loan term: If you’d like to pay off your motorcycle loan faster, you can switch to a loan with a shorter term. For example, you can end your 72-month bike loan and replace it with a 36-month motorcycle loan. 
• Smaller monthly payments: Have you found a lender willing to reduce your monthly bike loan payments by offering a lower interest rate or a longer repayment term? Refinancing lets you switch to their loan.
• Change cosigner: You can also refinance to remove or replace your cosigner.

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Who can refinance a motorcycle loan

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Each lender has unique eligibility requirements for determining who qualifies to refinance their motorcycle loan. Common requirements include:

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• Credit score: Having a good credit score, above 670, increases your chances of qualifying for refinancing and getting the best terms. However, some lenders are willing to refinance borrowers with poor or fair credit (580 to 669), though they often charge higher interest rates.
• Income and payment history: You’re more likely to qualify for refinancing if you can show proof of steady income and on-time monthly payments.
• Debt-to-income (DTI) ratio: A lower DTI ratio (under 50%) indicates you have less debt compared to your income. This makes you less risky to lenders and more likely to qualify for better loan terms.
• Loan-to-value (LTV) or equity: This measures how much you owe compared to your bike’s current value. Qualifying for the best refinancing terms is easier if your bike is worth more than your loan balance.

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How to refinance a motorcycle loan step by step

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Follow these steps to refinance your motorcycle loan:

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1. Review your current loan

Confirm your current loan balance, interest rate, monthly payment and any prepayment penalties. This step helps you decide if refinancing makes financial sense. For example, there’s little benefit in refinancing if it won’t lower your interest rate or improve your loan situation in some other way.

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2. Determine your goals

Next, clarify what you want to achieve by refinancing. It may be to lower your monthly payments, reduce your term or something else. Knowing your exact goal will help you choose a lender with refinancing terms that match.

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3. Confirm your credit score

Your credit score determines if you can qualify for better loan terms. You can check yours through your bank, lender or a credit app like Experian’s. A higher score increases your chances of qualifying for improved terms.

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4. Compare lenders and offers

Look for lenders that offer refinancing with your preferred terms, especially lower interest rates. Choose the ones with the best overall offers and apply for pre-approval.

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5. Apply for pre-approval

The application typically requires submitting documents that prove your identity, income, assets and debts. This may include proof of income, ID, motorcycle title and insurance information. Lenders that approve will provide a preapproval letter outlining the loan amount, interest rate and terms they’re offering.

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6. Choose your best offer

Select the best offer by choosing the one with interest rates, loan terms, fees and monthly payments that most align with your refinancing goals. Submit all required documents to accept your chosen lender’s offer. Your new lender will then pay off your old loan so you can start making payments under their new terms.

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When it makes sense to refinance (and when it doesn’t)

Even though you can refinance a motorcycle loan, it doesn’t always make sense to do so. For instance, refinancing might not be your best move if you have:

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• Negative equity: This means you owe the lender more than your bike is worth. If you refinance, you’ll either need to cover the shortfall out of pocket or have it rolled into your new loan. The latter will lead to high monthly payments that make your new loan more expensive than the old one. 
• High interest rate from bad credit: If your existing motorcycle loan’s rate is high because you applied with bad credit, refinancing might not change anything if your credit hasn’t improved.
• A too-old or high-mileage motorcycle: Most lenders view such bikes as high-risk, often leading to application denials or loan offers with higher interest rates.
• A loan with steep prepayment penalties: If your current loan charges penalties for ending it early, refinancing may cost more than you expected. 

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On the other hand, refinancing a motorcycle loan could be a smart move if you have:

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• Better market conditions: If interest rates have gone down, refinancing lets you secure a new loan with lower, more affordable rates.
• Better credit: Improvements in your credit since your last loan will improve your chances of getting a new one with better terms.
• Positive equity: If your bike is worth more than you owe, you can likely access better loan terms by refinancing.

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Ready to refinance your ride?

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Now that you know how to refinance a motorcycle, you can start the process for your financed bike with RefiJet. Start your motorcycle refinancing by submitting an online application, and we’ll match you with lenders offering competitive rates and terms that fit your goals. With RefiJet, prequalifying for refinancing is quick and hassle-free and only involves a soft check to protect your credit score.

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FAQs

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Here are answers to common questions about how to refinance a motorcycle:

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Is it possible to refinance a motorcycle loan?

Yes, many lenders offer motorcycle refinancing to borrowers who qualify. If interest rates have dropped or your credit has improved, you may qualify for better loan terms. 

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How long should you wait to refinance a motorcycle loan?

You should wait at least six months before refinancing a motorcycle loan. This is often enough time to improve your credit score and build a payment history to improve your chances of qualifying for better refinancing terms. However, you may need to wait longer if your current loan has a minimum term or early payoff penalties.

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Will refinancing my motorcycle loan lower my monthly payments?

Yes, refinancing your motorcycle loan can lower your monthly payments if you qualify for a new loan with a lower interest rate. Alternatively, your new lender could extend your loan term to reduce your monthly payments. However, this will increase the total interest you pay over time and your total loan cost.

Are there fees or penalties for refinancing a motorcycle?

Depending on your lender, refinancing a motorcycle loan may come with fees or penalties. For example, your current lender might charge a prepayment penalty for ending the loan early, while the new lender may charge refinancing application fees.

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Is it worth refinancing a small motorcycle loan balance?

Refinancing a small motorcycle loan balance might not be worth it if the fees will surpass your potential savings. However, it can be worthwhile if you can secure a much lower interest rate that guarantees significant cost savings.

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