Powersports loans are more complex than auto financing. They also require tighter credit requirements and more conservative debt-to-income ratios than traditional vehicle purchases.
CFPB supervisory highlights and recent actions make it clear that the bureau isn’t willing to grant powersports finance companies any leeway on repossession procedures. This makes it even more critical that origination software and processes ensure compliance.
Credit is one of the most important factors when it comes to powersports financing. Powersports depreciate much faster than traditional vehicles, which can make repossessing them a challenge in the event of default. Therefore, lenders tend to apply stricter credit criteria for powersports loans and set more conservative debt-to-income ratios.
A robust origination software system in combination with effective processes should help assure compliance with disclosure and documentation requirements unique to powersports lending. This includes loan applications, payment pre-authorizations, disclosure documents and titles.
Get the motorcycle, dirtbike or other powersports vehicle you want with a low interest rate and affordable payments when you finance with DNCU Borrow. We can help you finance the Polaris product that best fits your lifestyle. Even if you have bad credit, we can help. Apply online or at a branch today.
2. Debt-to-Income Ratio
A borrower’s debt-to-income, or DTI, ratio is one of the multiple factors lenders consider to determine how much they can lend to a consumer. It’s calculated by adding a borrower’s monthly minimum debt payments and dividing them by the borrower’s gross, or pre-tax, income. These debt payments can include credit card bills, car loans and student loan payments as well as some financial obligations like alimony or child support. However, utilities, groceries and housing expenses aren’t included in this calculation.
When it comes to powersports financing, this ratio can be more challenging because watercraft and other recreational vehicles depreciate faster than automobiles making repossessing them a challenge in the event of default. That’s why powersport lenders typically have more stringent credit requirements and conservative DTI ratios compared to traditional auto lenders.
When it comes to powersports financing, the length of the loan to value (LTV) is an important consideration. This is because powersports depreciate quickly, making repossessing them challenging if the buyer defaults. Therefore, lenders tend to have more stringent credit requirements and debt-to-income ratios for these types of loans.
Lenders consider the purchase price of the vehicle and any financed taxes and fees to come up with an estimate of what the equipment is worth. They also take into account any accessories or enhancements that are permanently affixed to the equipment, such as trailers or winches.
Because powersports are more difficult to repossess than traditional vehicles, they require stricter lending requirements. This makes it more challenging for individuals with bad credit to qualify for powersports financing. However, there are lenders that specialize in this type of lending and can offer financing to those with poor credit. These lenders will often look at your credit score, income, and debt history, but their credit criteria can be less stringent than some other lenders.
4. Interest Rates
Like any loan, powersports financing comes with interest rates. However, since lenders view ATVs, UTVs and other powersports vehicles as luxury items rather than a necessity, they typically have more flexibility in the types of rates they offer.
Lenders may also have different minimum credit scores and debt-to-income ratio requirements for powersports loans compared to other lending products, and some offer specialized bad credit financing that can be easier to qualify for. Additionally, many manufacturers of powersports vehicles offer rebates or special financing offers on their equipment.
With the right online lender, you can quickly compare rate and term options for a new or used ATV, utility-terrain vehicle or other powersports vehicle. Fill out a simple form to get possible loan amounts, terms and rates from multiple lenders based on your creditworthiness. You can even calculate your potential monthly payments by using our ATV loan calculator.