Generally, motorcycle buyers borrow a motorcycle loan to fund their purchase. If their financial position is strong, they would have no problem in securing a loan. But a person going through hard times financially, may find it difficult to get a willing lender. He would have defaulted on other installment payments which would have affected his credit score adversely. So the loan, if granted, would be a bad credit motorcycle loan – a risky proposition for lenders.
Those who are willing to lend such loans, try to protect themselves from the risk of loss caused by default, by charging heavy interest rates, limiting the loan tenure or charging exorbitant fees. The lender could be a bank, a credit union or an online lender.
Some banks do grant bad credit motorcycle loan requests at a reasonable rate of interest. The loan applicant is thrilled that he has not been penalized for his bad credit. He does not notice the fine print and immediately takes the loan. What he would not know is that the bank has not charged a very high rate of interest because it has charged a very high loan processing fee. This brings us to the matter of discussion – What is the maximum fee that a bank can charge? That depends on the state in which the bank lies and the rules applicable in that state. To protect borrowers, governments generally fix a percentage limit of the loan beyond which a bank cannot charge loan fees.
A person borrowing a bad credit motorcycle loan needs to check the loan processing fee charged by the bank. A high fee and a low interest rate are not necessarily beneficial to the borrower and he needs to do appropriate calculations to see if the loan is feasible.