Are you in the market for a powersport loan but aren't sure what financing options are available? Sure you could open a credit card for the purchase, but what about dealer financing or even banks that offer loans specifically for purchasing powersports? Here are several options for financing your powersport loan to help you get the best deal possible.
Powersport Loans: The Basics
If this is your first time shopping for a powersport loan, you might find that these loans are more difficult to get than a traditional auto loan. The reason these loans are harder to get is that it is much more difficult for a lender to repossess watercrafts than it is to repossess an automobile. As a result, lenders have much stricter requirements for FICO scores and debt-to-income ratios than if you were applying for a car loan.
You'll also find that powersport loans typically have higher interest rates than car loans, due to the increased risk for the lender. Watercrafts also depreciate much faster than automobiles, making repossessing in the event of default a losing proposition.
Types of Powersport Loans
The easiest way to fund your powersport purchase is to open a new credit card account. Credit cards are fast and easy to apply for; however, they typically come with the highest interest rates. One of the downsides of using a credit card is that you might have to apply for more than one card to cover the full balance of your purchase. Given the higher interest rates and the temptation to overspend, using credit cards is one of the least financially responsible options.
Can powersport purchases be financially responsible? If you have the cash on hand, this is the least expensive and, for some, the most responsible option for purchasing a boat, jetski or snowmobile. The downside of using cash is that you are giving it up for a depreciating asset. Keep in mind that these purchases depreciate much faster than purchasing an automobile or sport utility vehicle.
Dealer Financing Options
One good place to start when shopping for your powersport financing is the dealer. Dealer financing could mean anything from in-house financing to a new credit card or a loan from a local bank or credit union. As with any type of financing, it is important to read the fine print and understand what type of loan you're getting. The interest rates on dealer financing for powersport loans can vary widely depending on the type of financing the dealer is offering. Don't settle for dealer financing because it's quick and easy or because the salesperson is pressuring you to take out a loan.
Specialty Loans From Banks and Credit Unions
Other places to shop for powersport financing are your local banks and credit unions. Credit unions typically offer a wide range of loan products with interest rates lower than most banks. There may be membership requirements to join the credit union you are considering, so be prepared for some additional legwork to get your loan approved.
Banks are another option for your powersport loan. You'll find that large national chains offer specialty loans for purchasing personal watercrafts, like jetskis. Approval for these types of loans relies heavily on your FICO score and debt-to-income ratio. Shopping rates and terms from a variety of lenders will help you get a better deal; however, be careful not to allow lenders to make hard inquiries on your credit report until you have identified the best lender for your loan.
Understanding Your FICO Score
As with any loan, lenders rely heavily on your credit score for making approval determinations. There are a number of different credit scores out there, but the one lenders use frequently is the FICO score. FICO stand for the Fair Issac Corporation and is a proprietary scoring algorithm based on the content of your credit reports. When is the last time you checked your credit reports for errors? Mistakes or inaccurate information in your credit reports can drag down your FICO score, making it difficult to find a lender willing to approve your powersport loan application, even driving up your interest rate unnecessarily.
If you haven't checked your credit reports for errors this year, a visit to the website annualcreditreport.com will get you everything you need to review your credit reports for free. The government requires credit bureaus to provide free access to your credit history, making it unnecessary to pay for credit reports. Make sure that you review all three reports, including Equifax, Experian, and TransUnion. If you find errors in your credit reports, you will need to dispute the error with each credit bureau and allow enough time for the correction to be reflected in your FICO score.
Powersport financing can be a confusing and expensive process, adding thousands of dollars to the cost of your new personal watercraft. Doing your homework and shopping for the best deal from a variety of dealers, banks and credit unions will ensure you're getting the best deal.