Do You Qualify For a Powersport Loan? Find Out Now!

Powersport loans are different from conventional loans because you're financing something you want rather than need. When you're ready to buy your next Powersport vehicle, Vey's Powersports in El Cajon, California, is here for you. We also serve the San Diego and Santee, California, areas. 

The First Step

To qualify for a recreational loan, you'll need to check your credit score. Generally, higher scores are more likely to get approved with lower interest rates. A credit score in the low 700 range is good but a lot better if your score is above 720. A fair credit score is in the range of 580 and 680, and it's considered bad if it's between 300 and 580. It's tough to get a powersport loan with bad or no credit. 

Your Budget

Next is to establish your budget. Lenders are interested in two ratios to determine if you qualify for a loan. These two ratios are your debt-to-income ratio, or DTI, and the loan-to-value ratio or LTV. You'll have better chances of getting approved if these two ratios are lower. 

It compares how much you spend to how much you make each month. Your DTI is good if it is below 36%, but some lenders will approve ratios as high as 50%. You can use the following formula to determine your DTI ratio: 

Your current monthly debt payments ÷ Your monthly gross income = DTI

Lenders consider how much you're borrowing versus how much the vehicle is worth, which is the LTV ratio. LTV higher than 100% is usually too risky for lenders. For a lower LTV, you should try to get a better price from the dealer you're buying the vehicle from. You can check the vehicle's market value for free online at Kelley Blue Book and NADAguides. This formula is to figure out the LTV ratio:

The total amount you're borrowing ÷ The vehicle's value = LTV Ratio

Your Documents and Pre-Approval

The lender will require you to have your identification, income, proof of residence, and cosigner information and documents ready to go for qualification. Finally, you should get a pre-approval directly from a lender before going to a dealership to buy the vehicle. Dealers don't lend you the money, but they can raise the APR rates for customers as the middleman between you and the lender during negotiations. 

If you follow these steps, have a good credit score, and lower DTI and LTV ratios, you should have no problems getting approved for a recreational loan. Then, stop by Vey's Powersports in El Cajon, California, for all your powersport needs. We proudly welcome customers from San Diego and Santee, California, too!