My brother is looking to get a bike however he does not have the cash to buy one out right. Also he only has about 2 years of credit behind him. However his credit does show a history of on time perfect payments and an income of roughly 1500 a month for the last 3 years. He is having a hard time getting a loan without a co signer due to lack of credit. He has a credit score of 690 would he have a better chance of buying and financing from a dealership? Or does anyone know of any high risk loans with a higher interest rate?

Thanks for any input

 

The dealership will almost always finance you as long as there is money down. The interest rate is what will get you though. I had 24& interest on my bike with a credit score of 656. After 6 months of ontime payments i went to a credit union and they refincanced me at 8%. So its possible but youll just have to pay a higher rate for a bit.

Im also military so they know i will be employed for however many years. That helps.

 

690 is not a terrible credit score at all. How old is your brother? The co-signer requirement is likely due more to a combination of age and lack of a loan history.

I'd recommend just getting the loan cosigned by a parent if possible. It'll save a ton of money over dealer financed. Then after a certain amount of time he should be able to remove the cosigner.

 

My guess is that a primary factor is his income. $1500/month is very low for a person who's living on their own (don't know that situation, but that's how the finance company will look at it), and bikes are a luxury item. He'd have to show possibly a better (meaning longer, mostly) credit history, and a lower debt-to-income ratio for them to want to finance him. I had the same issue when I was in college, even though I could show scholarships and/or other help such that I had essentially no living expenses, and ~$1500/month of income (this was quite a long time ago). They still wanted a co-signer and very high interest.

 

If he is a member or can join a credit union, they are usually a lot better than a commercial bank on interest rate for this kind of loan.

 

Some good info here already.

+1 on credit unions for loans. Typically far better terms.

Co-signers are an option but other than a parent, most folks won't want to do this. A co-signer is the added security for the loan that the primary doesn't have. A co-signer is contractually & legally liable for the entire balance of the loan. This goes against their own credit. However, if your brother is financially responsible & your parents are gracious, this is an option though.

FYI: Many financial institutions won't make loans on bikes that are more than 7 yrs old.

Dealers will often finance to buyers that may not be able to obtain bank direct loans. While dealer financing is an option, I wouldn't recommend doing it unless you know *exactly* what you are doing. I.e. the interest rate you'll get, & all the terms of what the dealer is 'offering'. Dealers like to add in all sorts of 'dealer fees', 'financing fees', 'prep fees', etc etc etc...see where I'm going w/ this?

However, that's not to say that all dealers are like this. I once purchased a new Toyota truck from a Toyota dealership. I already had my bank loan lined up, however the dealership presented financing thru one of their providers (a known provider) that had a far better percentage rate than the bank. Also, they had insurance providers (again, known providers) that presented better rates. As a result, I went w/ the dealership's financing & insurance deal & make out very well. A note... I knew the dealership, the lot manager, & the sales rep w/ whom I did business.

Another word on financing... Honda Credit Financial Services - Honda Powersports has a good reputation for doing their borrowers right. I have friends that have been very happy w/ deals they have gotten thru Honda. Explore this & see if its an option.

Ultimately, this probably isn't what he'll want to hear...but my recommendation is that he should just save his money & buy outright. He could get a second job, sell some things, join the National Guard, etc. There are a lot good used bikes out there for not that much money. In this economy, I've seen lots of bikes up for sale on CL for well below KBB. There are some decent bikes out there for around $2K or less.

Sound like your brother is young. When you are young, you do not want to be straddled w/a high monthly payment for something that you get to enjoy. The enjoyment will turn into anguish if you get in financial trouble.

Good luck to him.

 

This^

I had a similar situation and couldn't get a loan on my first ride. Took me awhile to save up the dough but I was better off in the long run by not having to make payments or be made to carry full coverage.

 

Yeh I told him the same thing. I saved up 4k for my first bike cash and only had the insurance to pay after that but I wanted to do the same thing when I was in his shoes and wanted one RIGHT NOW! haha

He has plenty of money and makes good money on top of that with his printing company but hes the kinda guy that wants it now. He also likes to build credit so even if he can afford it he likes to make payments to continue building good credit. He wanted me to just ask on my forums for some other ideas but I'm gona keep tellin him the same thing I was told when I got my bike " Buy CASH "

Thanks guys

 

One thing to look at then the manufacturer's credit arm is your financier, is that you basically aren't rolling the loan into a revolving credit account. This situation pops up where the dealer can sell you the bike, outright cause the credit arm is taking the loan and putting it on a credit card for you basically. Then the dealer will tell you since the bike isn't really on a bank loan, you get the title, so you can only pay liability on a brand new bike.

Then you wreck it 4 months later, and insurance won't help you pay for it, cause you didn't have full coverage & gap coverage.

 

Straight CASH!