Boat Loans

How to Get a Used Boat Loan

If you’re in the market for a boat, you may want to buy a used one. Here’s why: Just like new cars, new boats depreciate in value the second they leave the showroom. By buying a used boat, you may be able to save a great deal of money and won’t have to worry about buying an asset that depreciates as much as 10% in the first year and 5% in the second year.

Unless you have the cash to pay for a used boat upfront, you’ll have to take out a used boat loan. Let’s dive deeper into what you should consider before financing a used boat and the various used boat lenders available.

What to consider before financing a used boat

Before financing a used boat, it’s important to consider the following factors.

Cost of the boat

The average cost of a used boat is $9,440. However, used boats vary widely in price so be sure to reference an industry resource like NADAGuides to understand the values and prices of used boats in your area.

The amount you can save on a used boat depends on the type and size of boat you buy. “For example, if you buy a 50-foot sea ray boat that’s worth $1.3 million new and get it a few years used for $900,000, you’ll be saving tens of thousands of dollars,” explained Jim Coburn, the board director at the Michigan Boating Industries Association and National Marine Lenders Association.

If you buy a smaller, less luxurious boat, however, you’ll experience a smaller price differential of just a few thousand dollars. It all depends on the boat you choose, as well as its new and used value. When shopping for a used boat, be sure to keep in mind how much boat you can realistically afford.

Your lender will want to know about the used boat you’re planning on financing. You’ll need to state its model, manufacturer and year, intended use, length and hull number and total cost to finance.

In addition to the cost of the boat itself, there are other expenses that come with owning a used boat. Make sure you consider how much you’ll have to pay for insurance, registration, taxes, boating licenses, storage costs and marina fees, equipment and accessories, fuel and maintenance.

Your credit score

Although a credit score in the high 600s or 700s is ideal, you may still be eligible for a boat loan if you have a lower credit score. Fortunately, there are a number of lenders who offer loans to borrowers with less-than-stellar credit.

Keep in mind, however, that if you do get a bad credit boat loan, you’ll likely have to make a minimum down payment of 10% and may end up with a higher interest rate. Your lender may also restrict the type of used boat you can buy.

Additionally, understand that while a used boat loan may come with a slightly higher interest rate than a new boat loan, it is not any easier or harder to finance a used boat loan.

Before you take out a used boat loan, get pre-qualified. By doing so, you’ll know exactly how much you’ll get approved for and will have a good idea of the types of used boats you can afford to buy.

Your current financial status and long-term goals

Before you finance a used boat loan, you can expect a lender to ask for and evaluate certain information about you. Your credit score, debt-to-income ratio and net worth, as well as how stable you are in your job and home ownership, will play a role in whether or not you are approved for a used boat loan.

“If you’re financing a used boat that’s over $100,000, the lender may require more information. You’ll likely need to provide additional documentation such as your personal financial statements that show your net worth,” said Coburn.

In addition to evaluating your current financial status, you’ll want to think about your long-term goals before investing in a boat. According to Doug Oosterhart, Certified Financial Planner (CFP) and owner of LifePoint Planning in East Lansing, Michigan, it’s important for potential purchasers to consider how “[a] major purchase [like a used boat] impacts the success of their long-term financial goals. For example, maybe buying a used boat today means they have to work an extra year or two before they retire.”

Where do you find a used boat loan?

There are a number of places you can go to for used boat financing. Let’s take a look at the options you can consider as well as the pros and cons of each.

Online lenders

There are many online lenders that offer used boat financing. The greatest benefit of obtaining a used boat loan through an online lender is ease and convenience. You can go through the entire process from the comfort of your own home. Online lenders also tend to have less stringent requirements than traditional lenders like banks and credit unions.

The drawback, however, is that you won’t be developing any kind of relationship with the lender, and it may be more difficult to get any questions answered.

LightStream and Essex Credit are two examples of online lenders that offer used boat financing. LightStream offers loans with rates from 4.29% APR (as of August 30 , 2019), while Essex Credit’s rates start at 4.59% (as of August 30, 2019).

Pros

  • Convenience: You don’t have to go anywhere to finance a used boat from an online lender.
  • Relaxed requirements: Compared to traditional lenders, online lenders have more relaxed requirements. If you don’t have the best credit, you may find the approval process easier with an online lender.

Cons

  • No relationships: If you work with an online lender, it will be more difficult to form a relationship with them. You may not have a point of contact you can go to with questions and concerns.
  • Not always reputable: Unfortunately, not all online lenders are reputable. Do your due diligence and avoid taking out a used boat loan from a lender with a poor reputation.

Credit unions

Credit unions are similar to banks, except that they are non-for-profit institutions that are designed for people who share a common bond. You may be eligible to join a credit union for a multitude of factors — perhaps its other members live in your community, went to your college or have also served in the armed forces.

Fortunately, most credit unions have relaxed membership requirements so becoming a member in order to take out a used boat loan shouldn’t be an issue. However, while credit unions typically offer individualized customer service, they don’t usually keep up with the latest banking technology so you may not be able to apply for a used boat loan online.

First Eagle Federal Credit Union offers used boat financing, and its lowest interest rates typically range between 4.99% and 5.99% (as of August 30, 2019), dependent on the terms. Provident Credit Union is another option with rates usually ranging from 4.50% to. 5.75% (as of August 30, 2019). Your exact interest rate will vary depending on your credit score.

Pros

  • Easy to join: It’s not too difficult to join a credit union, as many have relaxed membership requirements.
  • Personalized service: If you value developing a relationship with a lender, you can do so at a credit union, as they’ll likely offer you personalized service.

Cons

  • Online applications not always available: A credit union may do things the “old school” way, so you may not be able to go through the loan process online.
  • Must be a member: To take out a used boat loan with a credit union, you’ll need to become a member. This may be a drawback if you don’t want to go through the membership process.

Banks

Unlike credit unions, banks are for-profit and lend money to various borrowers. You don’t have to be a customer of a bank to get a used boat loan from one. If you already have a checking or savings account with a certain bank, though, it may make sense to go to that bank for used boat financing, if it’s offered.

Although banks usually offer competitive interest rates on used boat loans, you’ll need to have strong credit to qualify for them. You can take out a used boat loan from banks like U.S. Bank and Wells Fargo.

With U.S. Bank, you may be able to land an interest rate as low as 5.74% (as of August 30, 2019), while Wells Fargo gives interest rate discounts to those who have qualifying checking accounts and sign up for AutoPay.

Pros

  • No customer or membership requirement: You can walk into a bank and apply for a used boat loan without being a current customer or member.
  • Can do everything in one place: If you already have an established relationship with a bank, it may be easier to go through your bank for a used boat loan.

Cons

  • Stricter requirements: If you have less than stellar credit, you may not qualify for a used boat loan from a bank, as they have more rigorous requirements than other types of lenders.
  • Longer wait time: It may take more time to get a used boat loan with a bank than an online lender.

Dealership financing

“Approximately 80% of boats [new and used] that are financed in the United States are done through dealerships” or another indirect lender, according to Coburn. With dealership financing, you walk into a dealer to buy a used boat. Since the dealership has relationships with banks and credit unions, it then handles your financing.

You can count on the dealership to help you with every aspect of your financing, from your application all the way through your loan funding. As Coburn noted, “[Dealers] have relationships with several lenders [so they] can help you find the best rate,” potentially eliminating the need to go to a bank or credit union.

Coburn believes that dealership financing is the ideal way to finance a used boat and that there are really no disadvantages of going this route — it’s like a one-stop-shop for all your used boat financing needs.

Marine Connection, Southeastern Marine and Sizzle Marine are a few examples of dealers that offer dealership financing.

Pros

  • Competitive rates: Since dealers have numerous relationships with other lenders, your chances of landing a favorable rate are higher.
  • Ease and convenience: The dealer will handle every aspect of your used boat loan so you can enjoy a hassle-free experience.

Cons

  • No direct relationship with the lender: With dealership financing, the dealer acts as the middleman, which means you won’t have a direct relationship with a lender.
  • Online applications may not be available: You may have to do everything in-person if you go this route.

Other types of financing

Getting a used boat loan through a bank or online lender isn’t your only option. You may also explore getting a personal loan, which can be used for a variety of purposes, or taking out a home equity line of credit.

Unsecured personal loan

If you have good credit, you may be able to finance a used boat with an unsecured personal loan with a low interest rate. With a personal loan that’s unsecured, your boat will not be at risk of repossession if you don’t repay your loan, though your credit will take a serious hit. Lenders do more heavily weight your credit score and financial history for approval though, since the loan is not backed by collateral.

While interest rates for personal loans are typically between 6% and 36% as of the date of publishing, with poor credit, you may see rates as high as the triple digits — that’s certainly higher than those for boat-specific loans.

LendingTree’s personal loan calculator can help you figure out how much you could take out to fund a used boat.

Pros:

  • Fixed monthly payments: Since personal loans come with fixed interest rates and terms payments, you’ll know your monthly payments and exactly how long it will take to pay off your used boat loan.
  • No risk of repossession: With an unsecured personal loan, the boat won’t go into repossession if you default.

Cons:

  • Fees: Many lenders charge fees for things like origination or late payments.
  • Strict eligibility requirements: It can be tough to qualify for a personal loan with a low interest rate, especially if you don’t have the best credit.

HELOC

A home equity line of credit or HELOC allows you to borrow money against your home’s equity as you need it, up to a certain limit. If you own a home, a HELOC could help you finance a used boat. With this option, a lender will typically lend you anywhere between 80% to 90% of your home equity value.

Lenders typically will look at your loan-to-value ratio, income, credit score, debt-to-income ratio and other assets for approval. Keep in mind that if you choose this option, you’ll be using your home as collateral and putting your home at risk to buy a boat, which is considered a non-essential item.

You can use LendingTree’s home equity loan calculator to find out how much equity you have in your home and understand whether a HELOC makes sense.

Pros:

  • Low interest rates: HELOCs typically come with low interest rates compared to credit cards and other financing solutions.
  • Tax deductible: You may be able to deduct the interest you pay on your HELOC.

Cons:

  • Variable interest rates: While the interest rates of HELOCs are usually low, they are variable, meaning they can go up and down. Additionally, some HELOC lenders charge annual fees, maintenance fees, transaction fees, and/or closing costs.
  • Your home is collateral: If you don’t repay your loan on time, you could lose your property.

How do you decide on the best way to finance a used boat?

To figure out the best way to finance a used boat, it’s a good idea to shop around. If you use a bank or a credit union, find out what it offers in terms of used boat loans. Then, go to a dealer with financing options and see if the dealer can give you a better interest rate and more favorable terms.

You may find that a dealership leverages its relationships with several lenders to offer you the best loan option for your unique budget and lifestyle needs. If your dealership is not able to do so, you can always go back to a bank or credit union.

In the event that you don’t have the best credit and/or prefer to do everything online, you may want to turn to an online lender that offers used boat financing. Just make sure the lender is reputable and that you’ve read up on lender reviews before moving forward.

The bottom line

If you enjoy boating and are looking for an affordable way to incorporate it into your life, a used boat loan may be the way to go. It can give you the opportunity to spend time on the water while also saving you thousands or even tens of thousands of dollars. You have a variety of options for how to finance a used boat, depending on your personal financial situation.

 

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