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How to Get a Used Boat Loan
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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. When buying a used boat, you may be able to save a lot of money and not have to worry about buying an asset that depreciates as much as 10% in the first year.
Let’s dive deeper into what you should consider before financing a used boat, as well as various used boat lenders that are available.
What to consider before financing a used boat
Your payment amount
Your payment MUST be something you can afford imminently. The total cost of boat ownership includes many items — you’ll have to pay for insurance, registration, taxes, boating licenses, storage costs and marina fees, equipment and accessories, fuel, transportation and maintenance. This all means that your used boat loan payments should be comfortably affordable.
Your credit score
Although a credit score in the high 600s or 700s is ideal, you may still be eligible for a boat loan with a lower credit score. Some lenders will offer loans to borrowers with less-than-stellar credit.
However, keep in mind that a bad credit boat loan will likely require a minimum down payment and charge a higher interest rate. Your lender may also restrict the type of used boat you can buy.
Your current financial status and long-term goals
Before you take out a used boat loan, get prequalified. By doing so, you’ll know exactly how much you’ll get approved for and have a good idea of the types of used boats you can buy. When you apply, the lender will evaluate your credit score, debt-to-income ratio and net worth. How stable you are in your job and homeownership will play a role in whether you are approved for a used boat loan.
In addition to evaluating your current financial status, you’ll want to think about your long-term goals before investing in a boat. For example, buying a used boat today may mean you have to work an extra year or two before retiring.
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 some options to consider, as well as the pros and cons of each.
Many online lenders 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. The drawback, however, is that it may be more difficult to get questions answered.
LightStream and Essex Credit are two examples of online lenders that offer used boat financing. LightStream offers used boat loans with rates from 4.29% APR, while Essex Credit’s rates start at 3.99% APR.
Credit unions are nonprofit institutions designed for people who share a common bond. You may be eligible to join a credit union for a multitude of factors, such as where you live, work, study or worship. Most credit unions have lax membership requirements and offer personalized service. But in order to take out a used boat loan with a credit union, you must become a member.
Navy Federal Credit Union offers used boat financing with rates from 7.45% APR. Digital Federal Credit Union (DCU) is another option with rates from 6.99% APR.
You don’t typically have to pass membership requirements to get a used boat loan from a bank (the exception is USAA Bank). Although banks usually offer competitive interest rates on used boat loans, you’ll need to have strong credit to qualify for them. U.S. Bank offers boat loans starting at 5.24% APR.
Many used boats are financed through dealerships. Dealers have relationships with manufacturers and lenders, and can guide buyers through every aspect of financing. The con, however, is that dealers typically inflate consumers’ APRs to make a profit. Make sure you know the rate you deserve before you seek dealership financing.
Other used boat financing options
Getting a used boat loan isn’t your only finance option: You may also explore getting a personal loan, which can be used for various purposes, or taking out a home equity line of credit.
Unsecured personal loan
If you have good credit, you may finance a used boat with an unsecured personal loan that has a low-interest rate. With a personal loan, your boat won’t be at risk of repossession if you don’t repay your loan — though your credit will take a serious hit.
Since the loan isn’t backed by collateral, requirements are strict; lenders heavily weigh your credit score and financial history for approval. Many also charge fees for things like origination or late payments.
While interest rates for personal loans typically start below 3% as of the date of publishing, you may see rates as high as the triple digits with poor credit. LendingTree’s personal loan calculator can help you figure out how much you could take out to fund a used boat.
A home equity line of credit (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. A lender will typically lend a maximum of 85% of your home equity value, minus the amount you owe on your first mortgage. You can use LendingTree’s home equity loan calculator to determine how much equity you have in your home and understand whether a HELOC makes sense.
The pros are that HELOCs typically come with low-interest rates. Plus, you may be able to deduct the HELOC interest you pay on your taxes, if the boat qualifies as a second home by merit of having eating, sleeping and toilet facilities. However, interest rates are variable and some HELOC lenders charge annual fees, maintenance fees, transaction fees, and/or closing costs. In addition, your home is also the collateral — as such, if you don’t repay your loan on time, you could lose your property.
When shopping for a used boat loan, keep in mind how much boat you can realistically afford. A used boat loan is worth it when it doesn’t stress you out and helps you enjoy being out on the water.