How to Get a Used Boat Loan

Whether you like to set sail for a relaxing day or go deep sea fishing, a used boat can make those dreams come true. But maybe you’ve been forced to put aside your dreams of owning a boat because you don’t have the funds to buy one.

Fortunately, financing options, like used boat loans, are available to make boats more accessible to boating enthusiasts. But before taking out a loan, familiarize yourself with the process to avoid surprises at the time of application or later.

How financing can be different for a used boat

While it is possible to obtain financing for a used boat, it becomes more difficult with older models. Depending on the year, make and model of the vessel, the lender may be hesitant to approve a loan for fear that it will become obsolete and you will stop making payments. So you may be charged a higher interest rate or be required to pay a large down payment to help minimize the risk posed to the lender.

What to consider before getting a loan for a used boat

Before shopping for a used boat loan, understand how these factors can impact your finances and the terms you receive.

Payment amount

Can you afford the monthly payment for a used boat loan? You can use a boat loan calculator to determine a purchase price that fits your budget. It is equally important to include other boat ownership costs that you will incur at the point of sale and for as long as you own the boat. These include registration fees and taxes, insurance of your boat, marina fees and storage fees (if applicable). Also, don’t forget to factor in the cost of fuel and maintenance, as well as your boating license fee.

Boat value

How much does the boat cost and how much loan will you need to make the purchase? Confirming this amount is essential, so you’ll know which lenders aren’t an option when shopping around. If you plan to include origination fees (if any) and other upfront costs in the loan, you’ll want to include them when calculating how much you need to borrow.

Credit score

The lowest interest rates on used boat loans are usually reserved for borrowers with good or excellent credit. A lower credit score does not automatically equate to a denial, but you can expect higher borrowing costs. Additionally, the lender may require a large down payment to secure a loan.

For example, if you get a $20,000 boat loan for 5 years with an interest rate of 8%, you will pay $406 per month and $4,331.67 in interest over the life of the loan. But if your credit score is lower and your rate is 21%, the monthly payment will increase to $541.07. Plus, you’ll pay $12,464.03 in interest, an increase of $8,132.36.

So it’s worth checking your credit score and making sure it’s up to snuff before applying. Otherwise, you could spend a fortune on interest.

Where to get a used boat loan

Used boat loans are available from dealerships, online lenders, traditional banks and credit unions. Here’s what you need to know about each option.

  • Online lenders: The whole loan process can usually be handled without going to a physical branch, making it a convenient option for getting a used boat loan. Many online lenders offer attractive loan terms because their operational costs are lower, allowing them to pass the cost savings on to customers.
  • Credit unions: You must be a member to get a used boat loan from a credit union. However, joining a credit union could be worth it, as many often offer competitive financing terms. You could also be approved with less than perfect credit if you have an existing relationship with a credit union.
  • Traditional banks: A traditional bank could be a viable option for a used boat loan if you have exceptional credit. Unlike credit unions, there are no membership requirements to apply and you may not need to open an account to take out a loan.
  • Dealer financing: Dealerships may offer in-house financing. Be sure to read the fine print, however, as these loans often come with higher interest rates to help the dealership increase their profit margins.

How to get a used boat loan

Once you’ve decided on the loan amount, crunched the numbers, and checked your credit score, here’s how to apply for a used boat loan:

  • Step 1: Select your type of loan. Choose between a secured loan that requires your boat to be used as collateral or an unsecured loan product with no collateral requirement.
  • 2nd step: Research lenders. Be aware of the interest rate, the repayment terms they offer, and the fees assessed to take out a loan.
  • Step 3: Get pre-qualified. Many lenders allow you to submit your details to get pre-qualified online and view projected loan offers and terms. This allows you to create a short list of lenders that might be suitable.
  • Step 4: Gather your documents. You will usually need a copy of your driver’s license, proof of residency and proof of income (i.e. payslips, W2 forms or bank statements) when your request. Avoid rushing to find them by preparing the documents you need beforehand.
  • Step 5: Submit a formal request. Apply to the lender offering the most favorable terms and submit the requested documents.
  • Step 6: Sign loan documents. Once your financing is approved, review the loan documents, ask the lender any questions you may have, and sign on the dotted line.

At the end of the line

A used boat loan is worth considering if you can’t afford cash. However, your credit score needs to be up to snuff to ensure you get the best finance deal. You also want to run the numbers to make sure you have room in your spending plan for monthly payments. Use the boat loan calculator to understand how much you can expect to pay each month.

Most importantly, research lenders and get pre-qualified to identify the best loan deals based on your credit profile. This way you can apply with confidence and have peace of mind knowing you’re getting the best deal on a used boat loan.

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