Getting Approved for a Boat Loan for an Older Boat

Buying a boat can be an exciting experience but it also usually requires taking out a loan unless you have tens of thousands of dollars in cash saved up. While getting a boat loan may seem daunting especially for an older boat, it is possible with the right preparation and research. In this article, we’ll provide tips for getting approved for a boat loan when buying an older vessel.

Why Banks Hesitate to Finance Older Boats

Banks and lenders tend to be more hesitant about providing financing for older boats compared to newer models. There are a few reasons for this

• Depreciation – Like cars, boats depreciate in value over time. A 10-year-old boat is typically worth 30-50% less than its original purchase price. If the borrower defaults, the bank has less potential to recover costs through repossession and resale.

• Maintenance costs – Older boats usually require more regular maintenance and repairs which adds to the owner’s expenses. If these costs become unmanageable, the owner may have trouble keeping up with loan payments.

• Outdated technology – Boats over 10 years old may have outdated navigation, safety, or mechanical systems that need upgrading. This adds to the buyer’s overall costs.

• Increased risk of damage – The longer a boat has been around, the more likely it has sustained wear and tear or damage that could be costly to fix. This makes the boat riskier collateral for lenders.

Tips for Getting Approved for a Loan on an Older Boat

While challenging, getting financed for an aged boat is possible if you take the right steps:

• Consider getting a pre-purchase inspection – Having a marine surveyor thoroughly inspect the vessel beforehand can identify issues early and give you an idea of maintenance costs. This report can provide peace of mind to lenders too.

• Make a large down payment – Putting down 20-30% or more on the purchase price signals you are financially committed and reduces the amount the lender needs to finance.

• Look for flexible lenders – Some banks shy away from older boats completely. Others specialize in financing them and can offer more tailored loan products.

• Highlight added value – If the boat has had recent upgrades like a new engine or navigation electronics, point that out to show the vessel has been kept up.

• Get gap insurance – This optional policy covers the difference between what your insurer pays if the boat is a total loss and what you still owe on the loan. It protects you from owing anything out of pocket if the boat is destroyed.

• Consider a shorter loan term – Opting for a 5 or 7 year loan instead of 10-15 years means you pay the loan off faster. This compensates for the boat’s age in the eyes of lenders.

• Maintain excellent credit – Having a credit score over 700 shows lenders you are financially responsible and able to manage debt. It can offset concerns about the boat’s age.

• Provide documentation on the boat’s condition – Maintenance logs, repair records, and past survey results can give the lender confidence in the vessel.

• Offer extra collateral – Pledging a second asset like a car or stocks/bonds as additional collateral can provide more security to lenders and increase your chances of loan approval.

Choosing the Best Lender for Older Boat Loans

With preparation and perseverance, there are lenders who will provide boat loans for older vessels. Here are some top options to consider:

• Credit unions – Member-owned credit unions may offer more flexibility than major banks when it comes to financing older boats. Start with ones local to marinas or boating communities.

• Online lenders – Companies like LendingTree, Lightstream, and Discover may look beyond a boat’s age to factors like your credit, income, and down payment amount.

• Boat dealers – Dealers want to sell boats. Some have relationships with lenders willing to finance older boats or may offer in-house financing themselves.

• Banks with specialty programs – Large banks like Wells Fargo offer recreational lending programs tailored specifically to financing boats up to 30 years old.

• Marine lenders – Companies like Merchants Marine Finance and Essex Credit Corporation focus solely on boat loans and may accommodate older vessels.

What Info Lenders Consider When Reviewing Your Application

When applying for a boat loan, there are key criteria lenders evaluate to determine your creditworthiness:

• Down payment amount – Typically 20-30% down shows commitment. Less than 10% down requires excellent credit to qualify.

• Credit score and history – Minimum scores of 680-700 required. Past late payments or defaults make approval difficult.

• Debt-to-income ratio – Your total monthly debt payments, including the boat loan, should not exceed 40% of gross monthly income.

• Loan term requested – Shorter terms of 5-10 years are best for older boats. Lenders may deny terms over 15 years.

• Collateral – The boat itself and any additional assets pledged must be enough to secure the loan if you default.

• Income verification – Having stable income makes qualification easier. Retirement account withdrawals may be questioned.

• Usage – Loans are easier to obtain if using the boat for recreation vs. commercial purposes.

Common Requirements to Qualify for an Older Boat Loan

Borrowers seeking financing for aged vessels need to meet typical loan requirements:

• Minimum credit scores of 680-700+
• Down payment of at least 10%, ideally 20% or higher
• Total monthly debt under 40% of gross income
• Stable income history and employment
• Clean credit history with few or no late payments
• Current boat registration/title showing no existing liens
• Valid marine insurance quote covering total replacement cost
• Purchase price supported by third-party boat value estimates
• No bankruptcies or foreclosures in recent years
• Collateral valued higher than loan amount

Meeting these qualifications demonstrates to lenders you can safely manage the repayment of financing for a used boat.

Expert Tips for Getting Your Old Boat Loan Approved

We asked Jim Caldwell, a veteran boat loan consultant with over 30 years of experience, for his top tips for getting approved on an older boat loan:

“My number one tip is maintaining a credit score above 720 if possible. This gives you access to the best rates and terms, which are critical for aging boats,” Jim advised. “Also be conservative on the purchase price – don’t try to finance more than the boat’s NADA value just because you negotiated a lower sales price. Get a pre-purchase survey done so you enter the lending process with eyes wide open on the boat’s condition. Finally, be prepared to make a sizable down payment. The higher the better.”

Jim also emphasized having all your financial documentation in order before starting the loan process. Being organized and responsive to lender requests goes a long way towards smooth approval.

The Bottom Line

While obtaining financing for a 15 or 20 year old boat can be challenging, doing your homework on lenders, having excellent credit, and making a strong down payment does make getting a loan possible. Being prepared and persistent is key to getting your dream boat approved for financing, even if it has some years under its hull. With the right lender relationship, you can set sail on that older vessel soon! Let us know if we can help explain the boat loan process in more detail.