Itching to get out onto the lake? Do you daydream about being alone with a cooler and a fishing pole? Or perhaps you just want to spend lazy days with friends and family out on the water.
The idea of spending free time on the water is exciting, but the price tag that comes with it is not, especially since the best boats for family water sports can cost five figures, if not more.
A used boat, on the other hand, could be the key to making your dream affordable. Like cars, boats lose value as soon as they leave the dealership. In other words, buying a used boat could mean a much smaller price tag. Here’s what you need to know about how to get a loan for a used boat.
Buying a used boat can be an affordable way to get out on the water without breaking the bank on a brand new vessel. But financing a used boat purchase requires some extra considerations compared to buying new.
In this comprehensive guide, we’ll walk through everything you need to know about getting a used boat loan, including:
Why Choose a Used Boat Loan?
There are several key reasons why borrowing to buy a used boat makes sense
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Lower upfront cost – An older, pre-owned boat costs significantly less to purchase than a brand new model. This reduces the loan amount needed.
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Lower monthly payments – With a lower purchase price, used boat loans have more affordable monthly payments to fit your budget better
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Established value – Depreciation has already taken its toll on a used boat, so its value is more predictable.
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Certified pre-owned options – Some dealers offer certified pre-owned boats that combine age and savings with a warranty.
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Customization – You can often find a used boat already customized with upgrades and accessories you’d prefer.
While new boats depreciate quickly, used boats have already taken that financial hit while still offering years of useful life.
How to Qualify for a Used Boat Loan
Lenders evaluate certain criteria to determine if you’re a good candidate for a used boat loan:
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Credit score – Most lenders require a minimum score around 600-650, but 720+ scores get the best rates.
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Down payment – Typically 10-20% down is required. More is better to get approved and reduce rates.
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Debt-to-income ratio – Lenders look for a DTI below 40% so you can afford the new monthly payment.
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Collateral value – The boat must appraise for enough value to secure the loan amount requested.
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Stable income – Strong income reduces default risk. Self-employed borrowers may need 2+ years of tax returns.
Tip: Get prequalified to see loan amounts and rates you may qualify for before shopping.
Where to Get a Used Boat Loan
You have several options for where to get financing:
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Banks – Large banks offer competitive rates but may require pristine credit and borrower profiles.
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Credit unions – Great rates for members, but membership eligibility rules are strict.
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Online lenders – Offer easy rate comparisons, but may have less flexibility than local lenders.
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Boat dealers – One-stop financing but often has higher rates unless negotiated.
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Peer-to-peer lending – Borrow from individual investors for potentially better rates.
Shopping around helps compare loan offers to fit your financial situation.
Boat Loan Rates for Used Boats
Used boat loans typically have higher interest rates than new vessels:
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New boats – 4-10% APR for borrowers with great credit on new boats.
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Used boats – 6-15% APR depending on age, condition, credit score, down payment, and other factors.
Rates are higher for used boats due to the increased risk of older collateral. But shopping around can help find competitive used boat financing rates.
What Info Lenders Require for a Used Boat Loan
To apply for a used boat loan, you’ll need to provide:
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Personal information – Name, DOB, SSN, address
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Income verification – Pay stubs, W-2s, tax returns if self-employed
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Down payment source – Bank statements showing funds
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Collateral details – Boat make, model, year, asking price
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Loan amount requested
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Credit history – Credit report and scores from bureaus
Having this information ready makes for a smoother application process.
Boat Loan Term Lengths
Used boat loan terms typically fall between 5 to 20 years. Factors that determine term length include:
- Loan amount
- Interest rate
- Monthly payment amount
- Borrower preference
A longer term like 15-20 years lowers the monthly payment by spreading it over more time. But you pay more interest over the life of the loan.
Conversely, a shorter 5-year loan costs less in interest but results in higher monthly payments.
Typical Boat Loan Down Payment Amount
Lenders usually require a 10-20% down payment for a used boat loan. For example:
- Boat purchase price – $20,000
- 20% down payment – $4,000
- Loan amount – $16,000
The down payment reduces the amount financed to lower monthly payments. A larger down payment also shows the lender you’re financially committed.
Getting Preapproved for a Used Boat Loan
Getting preapproved involves submitting a loan application before you find a boat. Preapproval locks in an approval decision and loan terms.
The preapproval letter states the loan amount, rate, term length, and down payment the lender is willing to offer based on your finances.
With a preapproval letter in hand, you can negotiate a boat price confidently knowing your financing is secured.
Documents Required for a Used Boat Loan
In addition to personal and financial information, the lender will require documentation on the boat such as:
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Title showing lien-free ownership
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Registration proving current, valid registration
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Marine survey appraising the boat’s condition and value
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Records of major repairs and rebuilds
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Photos documenting the boat’s specifications
Private Party vs. Dealer Boat Loans
You can finance a used boat purchased either from a private party or boat dealer, each with pros and cons:
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Private party – May have better prices but needs more research on the boat’s value. Getting a marine survey is crucial.
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Boat dealer – More expensive but provides a certified pre-owned warranty on some boats. Easier financing process through dealer.
Refinancing a Used Boat Loan
If your existing used boat loan has a high rate, you may benefit by refinancing for a lower monthly payment.
To qualify for refinancing, you typically need:
- At least 20% equity in the boat
- Improved debt-to-income ratio
- At least a 12-month on-time payment history
- Strong credit scores
Use a refinancing calculator to estimate potential savings by plugging in your current loan details.
Mistakes to Avoid With Used Boat Loans
These common missteps trap borrowers in expensive loan terms:
- Not comparing loan offers from multiple lenders
- Putting less than 10% down
- Agreeing to an excessively long repayment term
- Overpaying for a used boat model
- Skipping the marine survey on a private party purchase
Avoid these errors to get the best used boat financing.
Is a Used Boat Loan Right for You?
If you want to buy a boat affordably and can qualify for financing, a used boat loan can be a wise choice. Be sure to run the numbers on total affordability and find a loan that fits your budget.
Follow the steps in this guide to get preapproved, find the right used boat, and save money on your dream boat with strategic financing. Soon you’ll be out on the water enjoying the perks of owning a pre-owned boat.
How to get a loan for a used boat
Securing a boat loan can be similar to getting a car loan. The lender will want to make sure the boat is worth what you’re paying for it and that you can afford to take on new monthly payments.
In order you get a used boat loan, you’ll need to provide your lender with the following information:
- Year, make and model of the boat
- Purchase price including equipment, accessories and upgrades
- Documentation/details of your employment, income and debt
- Marine survey, if requested
When you apply, the lender will evaluate your credit score, debt-to-income ratio and net worth to determine your creditworthiness.
Total cost of ownership
The purchase price isn’t the only cost involved with buying a boat. You’ll have to cover a handful of other costs to complete the purchase and maintain boat ownership for the long term.
Sure, the lender will review your situation to see if you can afford a loan, but before you buy, be sure to use a boat loan calculator and see if there’s room in your budget for the total cost of owning a boat. Don’t forget to factor in extra costs, including:
- Down payment (likely 10%-20%)
- Lender fees
- Monthly loan payment
- Sales tax
- Registration
- Insurance
- Slip fees
- Equipment
- Fuel
- Repairs
- Marina fees and/or storage
- Transportation
The higher your credit scores, the better your chances are of getting approved for the best boat loans with low rates and fees. But you may not need excellent credit to qualify. In fact, some used boat lenders will approve you for a bad-credit boat loan with a score as low as 600.
Just be prepared to pay more for a loan with a lower credit score. The lender may ask for a bigger down payment, for example, or approve you with ultra-high APR.
According to the National Marine Lenders Association (NMLA), everyone who buys a used boat should hire a marine surveyor. There’s also a possibility your lender will require you to take this step.
A marine surveyor performs several services, including inspecting the boat’s condition, verifying the registration number and assessing the boat’s value. You may be able to find a marine surveyor through The National Association of Marine Surveyors or the Society of Accredited Marine Surveyors.
Boat Loans 101: Should You Finance A Boat?
FAQ
Will a bank give you a loan for a used boat?
Is it hard to get a loan to buy a boat?
What credit score do you need to buy a used boat?
How do most people finance a boat?
How do I get a boat loan?
Boat Trader’s easy online Boat Loan Application is our recommended marine financing solution. Boaters can expect a rough standard 20/20/5 loan (20 year loan with a 20 percent down payment at 5 percent interest) to be processed quickly and relatively hassle-free. Above: Boat loans can be confusing.
What should I know before applying for a boat loan?
Before applying for a boat loan, you should know your credit score and how much you want to borrow. A boat loan is a type of financing used to purchase a boat or another marine craft. Like auto loans and personal loans, these installment loans usually come with fixed interest rates and monthly payments and a set repayment term.
What is a boat loan?
A boat loan is an installment loan with fixed monthly payments typically over two to 20 years. You can get a boat loan from a bank, credit union or online lender. Interest rates and loan terms vary based on the lender, the size of the loan, your credit score and income, and whether the loan is secured by the boat or unsecured.
Do you need a boat loan?
If your sights are set on buying a boat so you can set sail whenever you want, you may need to get a boat loan to make that dream a reality. Boat loans are a type of installment loan that is used specifically for the purchase of a vessel. These loans can be secured or unsecured and have repayment terms of two to 15 years.