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The decision to buy an older used boat or a new boat often depends on price, the boat loan options available, and how often you plan to use the boat. Financing a boat with a marine dealer for year-round use is quite different from taking out a loan to purchase a used boat from a private owner for weekend fishing trips.
Lenders typically offer longer terms and lower interest rates for new boats, but you may have to pay a higher interest rate for a boat that has some wear and tear. As with any type of loan, your credit and financial situation will have a big impact on the interest rates and terms of the boat loan you qualify for.
Boat loans for old boats
Lenders may be more strict when financing older, used models because of the greater financial risk. Secured lenders are less likely to consider outdated vessels because repair and maintenance costs can be high. If your boat is outdated or shows significant wear and tear, you may not be able to get a secured loan.
Strong Points
- When you choose an unsecured loan to buy a boat, you can get financing quickly.
- A lower boat price usually means you have to borrow less and therefore have lower monthly payments.
- If you choose an unsecured loan, no down payment is required.
Cons
- Some lenders may not offer financing on older boats.
- If you need an unsecured loan, the short tenor available could make it difficult to make payments.
- Fees and charges are usually higher.
Boat loans for new boats
If you’re a boat enthusiast who fishes all year round or enjoys being on the water all summer long, buying a new boat to accommodate your heavy use may be a good choice. Boat loan providers may offer special discounts on newer models or add extra costs like storage, maintenance, and fuel to the loan amount.
- For creditworthy borrowers, interest rates can be lower.
- A longer term spreads the cost of the boat out and keeps your payments lower.
- Your new boat marine dealer may offer financing incentives and upgrades with on-site financing.
Cons
- Secured loans may take longer to fund and require more documentation.
- A down payment may be required.
- If you have a low credit score, you may not be able to qualify.
Financing Used and New Boats
Whether you’re buying new or used, there are two types of boat loans: secured and unsecured.
Secured loans are more common for new boats because they allow you to borrow a larger amount for a longer period of time. With an unsecured loan, you don’t use your boat as collateral, so you qualify based on your credit and financial situation. An unsecured loan is an easier way, and sometimes the only way, to finance an older, used boat.
Secured Boat Loans
With a secured loan, your boat is used as collateral, allowing the lender to repossess your boat if you default. This additional security allows secured boat lenders to offer lower interest rates and terms of up to 20 years than unsecured loans.
Secured boat lenders tend to scrutinize the make, model, year, and features more closely. They may require an inspection by a marine inspector to certify that the boat is safe.
Like new cars, new boats depreciate quickly, making used boats less attractive to lenders. Financing an older boat can be difficult unless you opt for an unsecured loan. Lenders may require a larger down payment to cover their risk, or charge higher interest rates and fees.
Unsecured Boat Loan
The most common unsecured boat financing option is a personal loan. The funds can be used for any purpose, which means the lender won’t take the type of boat you’re buying into consideration when approving you. It’s not impossible to finance an older used boat, but you’ll likely be charged a higher interest rate than a newer model or newer boat.
Personal loan lenders typically don’t offer terms longer than seven years, so your payments are likely to be much higher than a secured boat loan. Interest rates on unsecured personal loans can also be much higher, especially if you have fair or poor credit.
Should I finance a new or used boat?
Before you apply, review the lender’s eligibility requirements and check your credit score to see if you qualify. Most boat loan lenders require a good to excellent credit score for approval, so build your credit before applying if possible.
Use a boat loan calculator to estimate your payments. Add in allowances for upfront costs and any extra features you think you might want on your boat. This will give you an idea of the price of the boat you can afford.
The process of getting a boat loan is similar whether you’re buying used or new. You fill out an application, document your income and address, and a lender will check your credit report. Secured loan lenders will look at the year, make, and model of your boat to determine what terms they’ll offer you.
Before making your final decision, consider how much it will cost and how much time it will take to store, maintain, transport and fuel your boat. If you use it for general recreation or travel infrequently, you may be better off choosing a used boat. Many boats are reliable and can save you money by avoiding the full price of a new boat. If you only use your boat occasionally, compare the costs of buying versus renting. Ongoing costs can add up, especially if you use your boat regularly.
Is it easy to finance a new boat?
If you have good credit and a solid financial standing, financing a new boat may be easier. Interest rates on loans with good credit are much lower than those with bad credit. It may be better to finance a used boat with a personal loan, so you don’t have to jump through hoops regarding the age and condition of the boat.
Next steps
Boat loans are available from a variety of financial institutions, from banks and credit unions to online lenders and dealership-based marine finance companies. When searching for a boat loan, compare offers from at least three lenders to ensure you get the best terms and interest rate available.
Research interest rates and terms, along with loan amounts, fees, and perks. Get pre-qualified with each lender you’re interested in to get an idea of what kind of financing you can get without damaging your credit.
