Got some wiggle in my Deore M525 rear hub. Does this mean my bearings are worn out or something major? I figured I'd post here before I bust into it. I know rear hub service is no quick/easy thing and I've never done it before. BTW, it engages fine and spins great on the bike.
All Shimano hubs feature a "loose-ball/adjustable cone-type" bearing system. Therefore, totally repairable, usually with relatively inexpensive tools. Yours is gonna need a 15mm Cone Wrench, as well as a 17mm box-end spanner. The things to watch out for are that you confirm that both the drive-side cone/locknut assembly is tight-most cases of bearing "knock" like yours are the result of the drive-side cone pack coming loose. A good shop/mechanic should bust out a cone adjustment in 10-15 minutes. A total repack, without parts, shouldn't cost more than $35. Make sure you/they check the torque on yer freehub body bolt, as it can loosen up and present as "bearing knock", as well. Finally, as with all "quick-release" type hubs, try to leave a skosh of "knock" in the bearing adjustment, as this will be taken up by a properly tensioned Q/R skewer.
Agree with the above statements. here is a link to the Park Tool wbsite that may help you understand what exactly you need to do. Too bad you live so far away or I'd say:"Bring it over and let me teach you how to fix it".. Park Tool Co. » ParkTool Blog » Hub Overhaul and Adjustment Good luck with it!!
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As long as it doesn't look too dry or dirty under the dust cap I would just try to readjust the cones. Follow the Park Tool link above. It's not very difficult at all, though it may take a few tries the first time. Just be careful not to over tighten. As mentioned above, it should feel slightly loose before you put the wheel in the bike and tighten down the skewer, but it looks way too loose in the video.
As long as you didn't ride with it like that for too long and adjustment should work just fine. Riding with it loose for too long could cause uneven wear in the cup, cone, or bearings. The bearings and cone can be replaced, but the cup is part of the hub.