If you are in the market for a new motorbike but know that your credit rating is suffering from previous mishaps, there are still ways to obtain your new set of wheels using a finance package. The payoff, however, is that lenders who cater to those with poor credit ratings may charge extortionate amounts of interest meaning your bike can become a very expensive purchase.
There are ways around it. By researching which companies can help you get your foot back on the credit ladder, or finding loan companies that offer reasonable rates, you may still be able to buy your new bike on finance.
First off, you may not even know what your credit score is, or if you are likely to be considered a greater risk to a lender. You can easily apply for a credit check online for the cost a few quid which will show you your score.
If you know, however, that you have missed payments in the past, have been visited by the bailiffs or have CCJ’s against your name, chances are that your credit score will be too low for you to take advantage of normal lending rates and deals.
If your credit score is below par, don’t panic – there are still some options available to you:
Most banks and High Street lenders will only offer loans to those with an acceptable credit rating. But there are some specialist lenders that deal specifically with individuals with a poorer score. Lenders that offer ‘bad credit loans‘ to people who they deem to be a greater risk, will come with higher interest rates and lower limits. In fact, the bigger the risk the lender considers you to be, the more interest you will have to pay and the greater the restrictions you will face.
It’s not all doom and gloom though. If you have a regular income, own your own home or and can prove that you can offer financial stability, lenders will take these considerations into account.
If you can find a lender willing to cover the cost of your bike, this can actually help to repair your credit score in the long term. Provided you keep up repayments and do not break the contract in any way, you will slowly become more attractive to mainstream lenders, meaning that you could be eligible for better deals in the future.
Check out your local bank’s rates or get an online quote from a reputable lender like AA Loans.
In much the same way that some lenders will approve personal loans for those with a poor credit score, there are motorbike finance companies that will do the same.
Again, the payoff will be that you pay higher interest rates, and will probably be subject to lower lending amounts. Because bike finance packages like PCP or HP are secured against the bike you buy, you will usually need to find a deposit amount in the first instance. Buyers with poor credit may be asked to find a bigger deposit than those with good credit.
If you find a bike you like, talk to your dealer or research vehicle finance companies online. If you are employed, have a regular income and have other assets to your name, like your home, for example, you should be able to find some assistance with financing your bike.
Much like taking on a personal loan, provided you make all payments and do not default on the agreement in any way, these types of finance packages can help you to improve your credit rating for the future.
Whether you opt for a personal loan or a finance package, all lenders are required to be responsible lenders and will only lend as much as they believe you can afford to pay back. This means that you may be limited to second-hand bikes of a certain type or price.
Never use payday loans or unregulated lenders to purchase goods like a new bike. These types of loans offer extremely high rates of interest and you will almost certainly be paying off far more than the bike is worth in the long term.
Credit Unions are becoming a popular option for those who are looking for low rate finance whilst suffering from a poor credit score. Set up to help those struggling with debt, they can usually offer rates that are able to compete with the high street lenders.
Don’t get too excited though as they often have strict rules and are usually only offered to individuals with a common bond, for example, NHS workers, trade union members or even members of the same church.
They are community funded and can, therefore, stipulate who they will and won’t help. So if you’ve got your eyes on a new Ducati V4S, you’re not going to be in luck.
They could be worth looking into though, if you need a bike to get to work on, depending on your circumstances. You can find out more about which unions are local to you here.