How To Get a Loan for a Used Boat
Itching to get out onto the lake? Do you daydream about being alone with a cooler and a fishing pole? Or perhaps you just want to spend lazy days with friends and family out on the water.
The idea of spending free time on the water is exciting, but the price tag that comes with it is not, especially since the best boats for family water sports can cost five figures, if not more.
A used boat, on the other hand, could be the key to making your dream affordable. Like cars, boats lose value as soon as they leave the dealership. In other words, buying a used boat could mean a much smaller price tag. Here’s what you need to know about how to get a loan for a used boat.
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How financing a used boat can be different
Not every lender offers loans for used vehicles, especially boats. Like with car loans, you may need to shop around to find a lender that finances the type of boat you want.
Some lenders have restrictions on private boat purchases (as opposed to boat dealerships), and each one will have their own rules regarding age, make and model. For example, Patelco increases your APR by 0.50% for boats with over 100,000 miles, and they don’t offer loans for boats with over 125,000 miles. Truist only finances boats under 30 feet long.
When compared to new boat loans, used boat loans typically have higher interest rates. The lender may also require a marine survey to determine the value of a used boat (more on this below).
What to consider before financing a used boat
Before you fall in love with a boat, be sure to consider the requirements for getting a loan. Financing a used boat can be expensive, even if the boat itself is cheaper than buying new, and your credit may need work before you can get preapproved for a boat loan.
Total cost of ownership
The purchase price isn’t the only cost involved with buying a boat. You’ll have to cover a handful of other costs to complete the purchase and maintain boat ownership for the long term.
Sure, the lender will review your situation to see if you can afford a loan, but before you buy, be sure to use a boat loan calculator and see if there’s room in your budget for the total cost of owning a boat. Don’t forget to factor in extra costs, including:
- Down payment (likely 10%-20%)
- Lender fees
- Monthly loan payment
- Sales tax
- Registration
- Insurance
- Slip fees
- Equipment
- Fuel
- Repairs
- Marina fees and/or storage
- Transportation
Credit score
The higher your credit scores, the better your chances are of getting approved for the best boat loans with low rates and fees. But you may not need excellent credit to qualify. In fact, some used boat lenders will approve you for a bad-credit boat loan with a score as low as 600.
Just be prepared to pay more for a loan with a lower credit score. The lender may ask for a bigger down payment, for example, or approve you with ultra-high APR.
Marine survey
According to the National Marine Lenders Association (NMLA), everyone who buys a used boat should hire a marine surveyor. There’s also a possibility your lender will require you to take this step.
A marine surveyor performs several services, including inspecting the boat’s condition, verifying the registration number and assessing the boat’s value. You may be able to find a marine surveyor through The National Association of Marine Surveyors or the Society of Accredited Marine Surveyors.
How to get a loan for a used boat
Securing a boat loan can be similar to getting a car loan. The lender will want to make sure the boat is worth what you’re paying for it and that you can afford to take on new monthly payments.
In order you get a used boat loan, you’ll need to provide your lender with the following information:
- Year, make and model of the boat
- Purchase price including equipment, accessories and upgrades
- Documentation/details of your employment, income and debt
- Marine survey, if requested
When you apply, the lender will evaluate your credit score, debt-to-income ratio and net worth to determine your creditworthiness.
Where to get a used boat loan
Used boat lending is a bit of a niche market. But if you look around, you can find several places to get your financing. Here’s a breakdown of what makes each lending source unique:
- Online lenders: Online lenders can be all over the map when it comes to rates and fees, but it’s possible to find reputable lenders online. One option is LightStream, which has boat loans that start at 6.99% APR for buyers with excellent credit and can range as high as 15.89% APR. Meanwhile, Southeast Financial offers rates as low as 6.99% and also works with bad-credit borrowers.
- Credit unions: Your credit union can be a great place to start. Credit unions tend to offer the lowest rates on financing and some offer special discounts for their members. Mountain America Credit Union, for example, finances boats that are up to 19 years old, and they don’t charge an application fee. On the other hand, credit unions often have strict requirements for membership, and you’ll probably have to be a member in order to apply for a loan.
- Banks: Banks are another good option for buyers who want to avoid paying excessive finance charges at a dealership. However, banks typically have stricter credit requirements than dealers. One option is Essex Credit, which offers boat loans starting at 11.74% APR. Just note that their loans are only available in 22 states and the minimum credit score is 700.
- Dealership financing: Going through a boat dealership may mean a one-stop shopping experience — get your boat and financing in the same place. Dealerships might work with buyers who have lower credit, too. The price of that convenience is usually high, however, since dealerships often mark up prices on the financing they offer. And boat dealers who advertise loans for poor credit or no credit are likely to charge even more.
Other used boat financing options
If you need cash for your purchase, a used boat loan isn’t the only option. Just be sure to consider the pros and cons of these options before signing on the dotted line.
Personal loan
Adding personal loans to your list of financing options can give you a lot more lenders to choose from, since most banks and credit unions commonly offer this type of loan.
The downside is that a personal loan will probably have a much higher APR than a used boat loan. Why? Because personal loans are unsecured, meaning they aren’t backed by collateral that the lender can repossess if you fall behind on payments.
While personal loan rates typically start below 7%, they can often be as high as 36% APR. Poor credit borrowers may even see personal loan rates in the triple digits.
HELOC
If you’re feeling stuck on how to get a loan for a used boat, a home equity line of credit (HELOC) could be the solution. Homeowners with equity — meaning their house is worth more than they owe on their mortgage — may be able to qualify.
HELOCs work like credit cards: you can borrow up to a certain limit and pay it back an unlimited number of times. The upside to taking out a HELOC is that interest rates are typically low. But there’s a whole list of downsides.
Unlike a boat loan, you risk losing your home if you fall behind on a HELOC. Interest rates are often variable, too, which means you can’t predict what your payment will be in the future. HELOC lenders may also charge monthly maintenance fees and membership fees and/or closing costs. For all of these reasons, it’s probably best to pass on a HELOC and focus on other ways to pay for a boat.