Powersport Financing

How To Finance an ATV With Bad Credit

a torn paper with a bad credit sign

ATVs are a popular recreational vehicle for many Canadians, allowing you to explore trails and backcountry areas. Their versatility and off-road capabilities make them appealing. However, many people have trouble getting approved for ATV financing, especially if they have bad credit.

With a low credit score, you may get turned down by lenders or pay very high interest rates. But getting ATV financing with bad credit isn’t impossible if you take the right steps. This guide will walk you through strategies to improve your chances of getting approved and finding reasonable loan terms.

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Check Your Credit Score

One of the first steps when looking to finance an ATV with bad credit is to check your credit reports and scores. This gives you an understanding of your current credit health and allows you to identify any errors that may be dragging down your score. You can get free copies of your credit reports from Equifax and TransUnion once per year through the government’s website. You may also choose to purchase your score directly from the credit bureaus.

In general, the higher your credit score, the better the loan terms and interest rates you can qualify for. Many lenders look for a minimum score in the 640 range to offer their lowest rates. With a score below 600, you may still get approved but will pay more in interest. If your score is under 500, financing options become limited.

Review your reports carefully and dispute any incorrect information with the credit bureaus. This can boost your score and improve your chances of ATV loan approval. Be sure all your positive payment history shows up accurately as well. Even minor improvements can make a difference.

 

Dispute Any Credit Report Errors

Before applying for ATV financing, it’s important to check your credit reports for any errors. Sometimes incorrect information can get onto your reports and unjustly lower your credit score. Every Canadian is entitled to receive one free copy of their credit report each year from both Equifax and TransUnion. You can order these reports through the companies’ websites.

Once you have your credit reports, review all the information listed – loans, credit cards, personal details, etc. Look for any inaccuracies, like accounts that aren’t yours or incorrect balances or payment statuses. If you find any errors, you have the right to dispute them.

Both credit bureaus allow you to dispute errors online or by mail. Submit copies of any evidence, like bank statements or other records, that can prove the inaccuracy. The credit bureau is required to investigate within 30 days.

If the dispute is found to be valid, the bureau will correct your report and notify you of the change. This can improve your credit score. Even a single error can unjustly drag down your score. Correcting mistakes leads to a more accurate credit profile.

It’s important to monitor your credit reports regularly and stay on top of any errors. This ensures you have the best score possible when applying for an ATV loan, which leads to better interest rates and loan terms.

 

Know Your Budget

Before shopping for an ATV loan, take time to determine your budget and know how much you can realistically afford. This involves looking at your income, expenses, debts, and savings to calculate:

 

  • How much you can put down as a down payment
  • What monthly payment fits within your budget

 

Add up your monthly take-home income after taxes. Then make a list of recurring monthly expenses like rent, utilities, car payments, student loans, and other debts. Subtract your expenses from your income to find your available monthly cash flow.

As a general guideline, your ATV payment should be less than 10% of your take-home income. If the payment amount stretches your budget too thin, consider less expensive ATV models or extending the loan term to lower the monthly dues.

Next, look at savings and assets that can go towards a down payment. Most lenders recommend at least 10-20% down to get approved. Aim to save enough over the coming months to put down $500 – $3,000 or more if you can.

Knowing your budget constraints from the start will help narrow down ATV options within your affordable price range.

 

Shop Around for Lenders

One of the keys to getting approved for ATV financing with bad credit is to shop around with different types of lenders. Taking the time to explore and compare loan options can help you find the best rates and terms for your situation.

Here are some of the main types of lenders to consider:

 

  • Banks: Large banks may be willing to approve an ATV loan even with a low credit score if you have an existing relationship and meet their other requirements. Compare options from major banks in your area.
  • Credit unions: Like banks, credit unions may offer better rates and more flexibility if you’re already a member. Local credit unions are worth exploring.
  • Specialty lenders: Companies that specialize in powersports loans, like motorcycle and ATV financing, are used to working with bad credit borrowers. They may offer loans when traditional lenders won’t.
  • Peer-to-peer lending: Websites like Lending Club allow you to request personal loans funded by individual investors. Rates may be higher but worth checking.
  • Subprime lenders: Specialty finance companies cater to borrowers with credit challenges. They provide loans with less stringent requirements.

 

In addition to researching different lenders, it also helps to compare specific loan offers side-by-side. Look at factors like interest rates, fees, loan terms, and additional requirements. A little time spent upfront shopping lenders can pay off big when you find the right financing option.

 

Consider a Co-Signer

If your credit score is low or you have a limited credit history, adding a co-signer with good credit to your ATV loan application can significantly improve your chances of getting approved. A co-signer agrees to be equally responsible for repaying the loan, so the lender is able to reduce their risk.

When applying with a co-signer, the lender will consider the co-signer’s income, assets, credit score, and debt-to-income ratio. This provides you a better shot at qualifying and securing more favourable loan terms like a lower interest rate. Just make sure the co-signer understands they are equally liable for the loan and that late or missed payments will negatively impact their credit.

Having a parent, relative, or friend with strong credit co-sign the ATV loan for you can open up financing options that may have previously been out of reach. Be sure to only choose a co-signer you trust and who is willing and able to take on the responsibility. Discuss expectations for making the monthly payments so there are no surprises.

While being a co-signer does come with risk, it can be rewarding to help someone in your life get approved for an ATV loan. Just be sure all parties involved fully grasp the arrangement before moving forward with a co-signed loan.

 

Apply for Pre-Approval

Getting pre-approved for ATV financing before you start shopping can make the buying process much smoother. Here are some of the key benefits of getting pre-approved:

 

  • You’ll know your budget – When you get pre-approved, the lender will tell you the maximum loan amount and terms you qualify for based on your credit, income, and other factors. This gives you a clear budget to shop within.
  • Stronger negotiating position – Showing up to a dealership with a pre-approval letter in hand puts you in a better negotiating position. The dealer knows you are a serious buyer who has already been approved for financing.
  • Faster purchasing process – With a pre-approval, the financing process at the dealership will go much quicker. The dealer just needs to confirm the details instead of submitting a whole new application.
  • Lock in lower rates – Interest rates can fluctuate frequently. By getting pre-approved, you lock in the rates that were available at that time.

 

Overall, taking the time upfront to get pre-approved makes the financing process smoother and faster when you are ready to purchase your ATV. It also equips you with important financing information before you start shopping around.

 

Save Up a Down Payment

Putting money down upfront on your ATV purchase can significantly improve the loan terms you are offered. Lenders view a down payment as an indication that you are financially committed to the loan and able to manage payments responsibly.

The typical down payment amount on an ATV loan is 10-20% of the purchase price. So for a $5,000 used ATV, you may want to plan for a $500-$1,000 down payment. And for a $15,000 new ATV, a down payment in the range of $1,500-$3,000 is recommended.

With a higher credit score above 700, some lenders may approve you for 100% financing where no down payment is required. But paying at least 10% upfront shows good faith to the lender and will lead to better interest rates and terms overall.

Think about how much cash you have on hand or can save in the coming months to put toward the ATV. Avoid tapping into emergency funds or retirement savings. Come up with a reasonable down payment goal and timeline that fits within your budget.

The larger down payment you can afford, the better. Putting 20% or more down signals to the lender you are financially prepared for this loan. With less money to finance, you also lower the monthly payment and total interest charges on the loan.

 

Provide Supporting Documents

Providing supporting documents can help strengthen your ATV loan application, even if you have bad credit. Lenders want to see proof that you can handle the monthly payments, so including income verification and other financial documents is recommended.

Some key documents to provide with your ATV loan application include:

 

  • Proof of income – Recent pay stubs, tax returns, bank statements showing recurring deposits
  • References – Personal and professional references can vouch for your character
  • Budget worksheet – Showing income, expenses, debt obligations
  • Down payment evidence – Bank statements, receipt for cash down payment
  • Collateral – Documentation of other assets you own

 

Having these documents ready signals to the lender that you are financially responsible and prepared to take on an ATV loan. Proof of steady income from your job gives the lender confidence you can make the monthly payments. Solid references demonstrate your reliability.

A detailed budget also assures the lender you have budgeted for the ATV payment each month. Evidence of your down payment and collateral further back up your ability to manage the loan responsibly.

Taking the time to gather these documents shows you are serious about getting approved for an ATV loan. Even with bad credit, having all your financial paperwork ready can improve the chances your application gets accepted.

 

Consider Used ATVs

One way to potentially lower the amount you need to finance is looking at used ATVs. While a brand new ATV may seem appealing, buying used can provide some key advantages when your credit is not the strongest.

The most obvious benefit is a lower purchase price. Used ATVs even just a couple years old can sell for significantly less than new models. This lowers the principal you’ll need to borrow. You may be able to get approved for financing a $5,000 used ATV when a $10,000 new one is out of reach.

In addition to the lower price, used ATVs will depreciate slower than brand new models. This means more of your payments go towards building equity rather than simply covering depreciation. You’ll reach the point where the ATV’s value exceeds the loan balance quicker.

Buying from a private seller can also provide more room to negotiate on price compared to a dealership. And if you opt for an older used ATV, you may be able to pay in cash rather than needing to finance. Just be sure to have a mechanic inspect any used ATV before purchasing.

So if your credit situation has you worried about getting approved for financing, or being able to afford the monthly payments, definitely give buying used strong consideration. The thousands often saved upfront can make securing a loan and managing payments much more feasible.

 

Expect Higher Interest Rates

When applying for an ATV loan with bad credit, it’s important to expect higher interest rates compared to applicants with good credit scores. Your credit score has a direct impact on the interest rate a lender will offer you.

Lenders view borrowers with lower credit scores as higher risk, so they charge more in interest to offset that risk. Here’s an overview of typical ATV loan interest rates based on credit score:

 

  • Exceptional credit (800+): 3-5% APR
  • Good credit (740-799): 5-8% APR
  • Fair credit (640-739): 8-12% APR
  • Poor credit (below 640): 13-18% APR

 

As you can see, there is a considerable interest rate increase between good credit and fair/poor credit applicants. For example, with a $10,000 ATV loan over 5 years, an 8% rate means paying $2,000 in interest versus $4,700 in interest with a 15% rate.

While the higher interest rate may be difficult to swallow, try to focus on the bigger picture. Accepting a higher rate can greatly improve your chances of approval. Making consistent on-time payments shows lenders you can handle the loan responsibly and will help rebuild your credit over time.

 

Compare Loan Terms

When shopping different lenders for an ATV loan with bad credit, it’s important to compare both the monthly payments and the total interest costs. You may find loans with similar monthly payments but widely different total interest charges.

For example, Lender A may offer a $10,000 loan for an ATV at 8% interest over 5 years. That results in monthly payments around $193. But over the life of the loan you would pay $1,158 in total interest.

Lender B, however, may offer a $10,000 loan at 12% interest over 3 years for monthly payments around $318. Even though the monthly payment is higher, you’d only pay $958 in total interest since it’s a shorter term.

It’s ideal to get the lowest monthly payment and lowest total interest costs. But with bad credit, you may need to weigh the two factors. Paying more per month to save on long-term interest costs may be worth it if you can afford the larger payment. Just make sure to run the numbers and compare offers fully before committing.

 

Make Timely Payments

Once you secure financing and purchase your ATV, it’s absolutely crucial that you make your monthly payments on time each month. Payment history makes up a significant portion of your credit score. If you miss payments, it can further damage your credit and make it even harder to qualify for financing in the future.

Set up automatic payments or payment reminders to ensure your payment arrives on time every month. Even one 30 or 60 day late payment can drop your score and show up negatively on your credit report. Stay disciplined and make your powersports loan a priority.

As you make consistent on-time payments each month, you’ll gradually start to rebuild your credit score. This will qualify you for better interest rates on future loans. Your good payment history shows lenders you can responsibly manage debt.

Sticking to your payment schedule is challenging when money is tight. But avoid the temptation to skip payments. Contact your lender immediately if you anticipate having trouble making a payment due to financial hardship. They may offer some flexibility or temporary relief options.

Timely payments demonstrate financial maturity and will help improve your credit health over time. This opens the door to more affordable financing options so you can continue pursuing your passion for off-roading.

 

Refinancing Options

After making on-time payments for a year or more, you may be able to refinance your ATV loan for better terms. Refinancing replaces your existing loan with a new loan, ideally with a lower interest rate. This allows you to lower your monthly payments, pay off the loan faster, and save money over the life of the loan.

To qualify for refinancing, you’ll generally need improved credit and sufficient equity in the ATV. Wait until your credit score has increased significantly, at least 50-100 points higher than when you originally financed. The higher your score, the better the terms lenders can offer.

You’ll also need to build equity by making payments over time. Most lenders want to see you owe no more than what the ATV is worth before they’ll approve a refinance. If you still owe more than the current value, you may need to make extra payments first to get the loan balance down.

Start researching refinance options a few months before your existing loan matures. Compare the new interest rates and monthly payments to make sure it makes financial sense. Closing costs for a refinance are typically lower than the original purchase. But refinancing only makes sense if the savings outweigh the fees.

 

Conclusion

Financing an ATV when you have bad credit may seem challenging, but it is possible with the right preparation and approach. The most important steps are checking your credit report, saving for a sufficient down payment, comparing loan offers, and providing documentation to support your application. While you’ll likely pay higher interest rates, following the tips in this guide can help you get approved for an ATV loan despite having poor credit.

In summary, focus first on improving your credit score if it’s below 600. Save up at least 10-20% of the ATV’s price for a down payment. Shop multiple lenders to compare rates and terms. Offer proof of income and a co-signer if you can. Consider a used ATV to lower the financed amount. And be ready to accept a higher interest rate. Taking these steps can put you in a good position to get the ATV you want, even with bad credit.

With persistence and preparation, you can finance an ATV despite bad credit. Use the loan as an opportunity to build your credit history and get back on track financially. Enjoy the freedom of owning and riding your own ATV by following these tips for obtaining financing approval.

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How To Finance An ATV With Bad Credit ​ Q&A

There are a few options for Canadians with poor credit to finance an ATV purchase. Many dealerships work with subprime lenders that offer higher interest rate loans to borrowers with credit scores below 650. Another option is to apply for a secured loan using the ATV as collateral from your bank or credit union. This allows them to seize the ATV if you default. Getting a cosigner with good credit will also make approval more likely.

Most mainstream lenders in Canada require a minimum score of 650-700 to qualify for an ATV loan. However, specialized subprime lenders are more flexible, often approving applicants with scores as low as 550. The lower your credit score, the higher your interest rate will be, so those with bad credit pay considerably more over the loan term.

You can usually finance 100% of the ATV’s purchase price, but a 20% down payment ($1,000-$3,000) is recommended to lower monthly payments. With bad credit, most Canadian lenders require at least 10-15% down on powersport vehicle loans to mitigate default risk.

The main documents needed are a valid Canadian driver’s license, proof of income (recent pay stubs), proof of address (utility bill), proof of auto insurance covering the ATV, references (for first time borrowers), and sometimes bank statements. If self-employed, financial statements are required to verify income.

Getting approved for an ATV loan without steady employment and provable income is very difficult in Canada, even with good credit. The best option is having a family member or friend with good credit co-sign the loan, agreeing to take over payments if you default.

Interest rates average 10-15% for borrowers with good credit (700+ scores) and 15-25% for those with poor credit on Canadian ATV loans. Promotional 0% financing deals are sometimes offered by manufacturers too. Secured loans against the ATV can have rates exceeding 25%.

With subprime credit scores (below 600), most Canadian lenders will approve loans up to $10,000 for an ATV purchase. Borrowing power rises significantly for applicants with higher scores. Exceptional scores (over 750) may qualify for up to $30,000 in financing.

ATV loan terms average 2-7 years in Canada. Applicants with good credit can qualify for longer 6-7 year loans to keep payments affordable. Subprime borrowers usually get maximum terms of 2-4 years. Paying off the balance early saves substantially on interest charges.

Many Canadian powersports dealers promise instant credit decisions and same day approvals through subprime lenders they partner with. However, the loan still requires underwriting before being finalized, which takes 1-3 business days in most cases.

Some of the top subprime ATV lenders in Canada include Freeride Financial, Wheels Financial Group, CreditStar, and RoadLoans. They underwrite higher risk applicants that big banks reject. Expect to pay significantly higher interest rates compared to applicants with good credit.

Canadian bank loans often have lower rates for qualified borrowers compared to finance offers from dealers that arrange lending through subprime companies. However, dealers are sometimes able to get loan approvals for those with bad credit. Shop and compare both options.

When financing an ATV in Canada, watch out for origination/documentation fees ($300+), lien registration fees ($50+), monthly account handling charges, prepayment penalties, and other confusing fees lenders tack on. Ask for full disclosure.

Make all loan and bill payments on time, pay down card balances, limit new credit applications that lower your score, and resolve any reporting errors on your credit file. Within 6-12 months of positive habits, your score can improve substantially.

Insurance is required when financing an ATV. Typical annual premiums range $150-$600 in Canada, depending on your age, location, driving record, credit score, coverage selected and deductible. Those with poor credit pay towards the higher end.

Making all payments on time demonstrates financial responsibility. This has an exceptionally positive impact on credit scores in Canada. Just one 30-day late payment can drop your score significantly. Set up auto-payments to avoid ever missing the due date.

Aside from loan payments, insurance and fuel costs, budget $500-1,000 annually in Canada for ATV maintenance like oil changes, tire replacement, brake repairs and tune ups. These costs are higher with frequent recreational use on rugged terrain.

If you are unable to qualify for an ATV loan, consider saving up to buy an inexpensive used model with cash, or leasing an ATV. Leasing has lower credit barriers, and you can return the ATV at lease-end rather than assuming ownership.

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