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Bad Credit Boat Loans: What Are They and How to Get One

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A bad credit boat loan could get you the cash you need to buy a boat even if you have a 550 credit score. You’ll most likely pay a higher interest rate, however. Bad credit boat loan borrowers can typically expect an APR around 17%. This means you should not take the first loan offer that comes along but shop around to find the lowest rate.

How to get a bad credit boat loan

1. Check your credit

Get your free credit report so you can make sure that there are no mistakes that are dragging your score down. You can dispute any inaccuracies or work to raise your score before you purchase a boat. You don’t have to have a perfect score to get a boat but improving it by even 10 points could help you be approved for a bad credit boat loan.

2. Pencil a budget

Boat prices can range widely depending on the type of boat you want. The two numbers that concern most borrowers are the down payment and the monthly payment. The standard down payment is between 10% and 25% of the boat’s price. And the monthly payment you choose needs to be financially comfortable for you. Here’s a boat loan calculator to help you with the numbers.

3. Decide on a boat

When you apply for a bad credit boat loan, you’ll need to state exactly which boat you want to finance. The lender will ask for the make, model, year, condition and the number of miles on the engine, if it has one.

4. Apply to several lenders

Because bad credit boat loans have higher interest rates, it’s important to shop around so you can get the lowest. It doesn’t hurt your credit score to apply to multiple lenders any more than it does to apply to one if you do all applications within 14 days. Once you have the loan offers, ask the dealership to beat the lowest rate you got.

5. Sign on the dotted line

The lender or the dealership finance manager will steer you through the loan and purchase paperwork. Here are ways to pay back an auto loan (or a boat loan) early so you can reduce how much you pay in interest over the life of the loan.

Current RV loan terms and rates

Here is a smattering of boat loan companies through which you could secure financing. The top two companies, Southeast Financial and iNet, offer bad credit boat loans.

Boat Loans for 2021
Company Starting APR* Terms (months) Loan amounts Credit score requirement
Southeast Financial 3.74% Up to 180 $15,000–$4,000,000 None
iNet Unspecified Up to 240 $5,000–$1,000,000 500
LightStream 4.29% up to 84 $5,000–$100,000 670
Essex Credit Unspecified 48–240 $10,000–$5,000,000 700

*May require certain loan amount and/or term; may include an autopay discount

Understanding bad credit boat loans

Experian defines “bad” or “poor” credit as FICO credit scores of less than 580. You can check your score here for free. Lenders use credit scores to evaluate how risky it is to lend money. The lower the score, the more risk, the higher the APR.

Boat loan interest rates by credit band
Credit band Average closed loan APR
Subprime 17.30%
Midprime 10.70%
Prime 6.03%

Source: LendingTree internal data January 2020 through June 2021

Example

To see what these APR numbers mean for your monthly payment and what you’d pay in total interest over the life of the loan, here are some numbers based on a $20,000 boat loan for a five-year (60-month) term.

Credit band APR Monthly payment Total Interest
Subprime 17.30% $500 $10,017
Midprime 10.70% $432 $5,912
Prime 6.03% $387 $3,216

How much boat can you afford?

Because a bad credit boat loan will cost you more, it’s especially important to understand how much boat you can afford. Use a boat loan calculator to understand exactly how much money you can spend on a boat. Your bad credit boat loan payment must be affordable because total costs of boat ownership include insurance, off-season storage, winterizing, launching/mooring/docking fees, fuel, maintenance and repairs.

On the calculator, plug in your potential loan amount, estimated interest rate and the length of the loan you’d like to get to see what your payment would be. Change any of the inputs to see how the payment changes.

Alternatives to bad credit boat loans

A bad credit boat loan isn’t the right move for everyone. If your credit score is low but you have a reliable income and a good relationship with your credit union or bank, you may be able to get a secured personal loan with better terms than a subprime boat loan. Unsecured personal loans can also be an option, but you will most likely need good credit to get approved.

Secured personal loan

There are plenty of lenders offering secured personal loans. You may get approved for a personal loan with a low credit score and still have some flexibility in choosing a term and payment that best fit your budget. The cons are that the loan terms may be shorter than a bad credit boat loan, origination fees may apply and interest rates could reach the legal limit for your state, which is as high as 35.99% in some places.

Cash

If you have the cash available to pay for the boat, you could get a hefty discount on the selling price and save hundreds, if not thousands of dollars in fees and interest while you work on repairing your credit.

Home equity loan or HELOC

If you own your home, you may be able to borrow against it. Loans that use real estate as collateral typically have lower interest rates. However, you would be putting your home at risk if you could not make the payments. Here’s more information on these options.

What to do if you aren’t approved

There are steps you can take to improve your credit or pay down your debt, save up and try again later. But if you don’t want to wait, there are options, including:

  • Get a cosigner: Ask someone you trust — and trusts you — to sign the boat loan with you. This person should understand their responsibility to repay the loan if you default. If your boat lender doesn’t allow cosigners, it may offer personal loans that do. Remember the pros and cons of personal loans we discussed earlier.
  • Make a healthy down payment: Your debt-to-income (DTI) ratio is a key ingredient to getting approved for a boat loan. By paying a healthy down payment, beyond the 10% to 20% that may already be required, you’re lowering the amount of debt you would be taking on with a boat loan, thus improving your DTI. It may not be enough to get approved, but it’s worth a shot.
  • Choose a less expensive boat: Consider buying a less expensive boat so that it’s easier to make a larger down payment, have a shorter loan term and make a smaller monthly payment.
  • Get credit counseling. The National Foundation for Credit Counseling (NFCC is a nonprofit organization that offers free and low-cost financial help.
 

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