Overview: Tips to Getting Used Boat Financing


Owning a boat can be a wonderful source of relaxation and recreation during the warmer months, particularly for those in coastal regions. Boats make it easy for family and friends to spend time together on the water, whether you are fishing, wakeboarding, or simply taking in the beauty of nature.

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Used boat loans help put the benefits of boat ownership within reach. Photo courtesy of: Savvy

Historically, boat ownership has come with a certain stigma of upper-class exclusivity. Thankfully, with a wealth of used boat financing options, owning a boat is entirely within reach. Having a boat doesn’t necessarily mean rolling in cash, nor does it mean emptying your bank account. Middle-class America is changing, diversifying mortagages, car payments, and used boat loans.

Instead of choosing a brand new boat, many consumers are opting for used boat financing instead. Similar to purchasing a used vehicle, used boats are typically a more affordable option. Still, even a used boat is a significant purchase, and the process for obtaining used boat loans can be confusing, especially for a first-time buyer.

Our review will act as an all-inclusive guide to cover the best methods to get used boat financing that works for you and your budget. First, our comprehensive review will provide an introduction to used boat loans by answering the following questions:

  • Why is used boat financing so popular?
  • What are the basic conditions for used boat loans?

Second, our review will detail the six best tips to getting used boat financing. These tips include:

  1. Conduct research (do your homework)
  2. Find loan officers to work with you on used boat loans
  3. Utilize local banking resources for lowered used boat loan rates
  4. Partner with the National Marine Lenders Association
  5. Consider arranging used boat financing through a dealer
  6. Look for possible tax breaks

With the proper tools, obtaining used boat loans is certainly within reach. By keeping these tips in mind, any consumer can find the used boat financing that works within their budget.

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Why Is Used Boat Financing So Popular?

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Not only are used boat loans more affordable, but purchasing a used boat often makes more sense. Photo courtesy of: Boats.com

Simply put, purchasing a used boat is not only a more affordable option, but it can often be a much smarter option. Boat maintenance and upkeep are big responsibilities, and they can certainly be cost-prohibitive. The estimated annual maintenance cost for a boat is 10% of the purchase price.

Things like state taxes, insurance, registration, mooring, and storage need to be taken into account as hidden costs. Basic safety items like flares, life jackets, and a fire extinguisher could easily total $500 for a family of five. With additional costs of navigational, fishing, or recreational equipment, the initial boat price skyrockets.

Used boat loans are a popular method to cut down overall cost. Just like with vehicles, the cost of a new boat actively depreciates within the first year. For that reason, a used boat can be gently used and still be a fraction of the original cost. Used boat loans can help make even a fractional cost more manageable.

When comparing new boat loan rates with used boat financing rates, there is not much difference. In fact, many lenders will charge equal interest for new boat loan rates when compared to used boat loans. With matching interest percentages, consumers can benefit by choosing lower dollar amounts for used boat loans as opposed to higher dollar amounts for new boat loans.

For example, Essex Credit charges the same interest rates for used boat loans as they do with new boats. Even options to refinance a boat loan retain the same boat loan rates and terms.

Purchasing a used boat is a smart decision, as used boat financing generates long-term affordability. With cheaper purchase cost, the potential for getting a larger boat for less, and lowered insurance rates, adding used boat loans to your budget becomes much more feasible.

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What Are the Basic Conditions for Used Boat Loans?

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Before jumping into boat ownership, there are a few key aspects of used boat loans to understand first. Photo courtesy of: Zizoo

Though used boat financing is often compared to used car financing, the main difference is in the length of the loan. Boat loan rates and terms tend to be more flexible, especially when considering used boat loans.

Many boat loans can be stretched to seven, ten, or even fifteen years. In fact, the average loan for 2014 was ten years. The most common used boat loans tend to be fixed-rate, fixed-term, simple-interest loans with identical monthly payments.

No matter what lender you choose, used boat financing comes with specific requirements. When going through a lender for used boat loans, keep the following conditions in mind:

  • All lenders will require basic information about the boat.

This may be difficult if you haven’t yet found the right used boat. Thankfully, some lenders will provide an estimate based on your desired cost.

  • Longer boat loan rates and terms require larger downpayments.

For a term of 15 years, a typical minimum downpayment is 20% of the total cost. Alternatively, because boats tend to hold their value longer than vehicles, options for repayment of used boat financing can be more flexible.

  • Debt-to-income ratio is crucial for used boat financing.

Before approving a used boat loan, most lenders require a debt-to-income ratio of below 40%. While some lenders calculate this number with a W-2 form or a current paystub, others may require more information, including individual tax forms and a personal financial statement.

  • Higher credit gives you lower interest rates.

As with any loan, credit scoring is a means of assessing the level of risk that each loan applicant carries. The best credit scores could see used boat loan rates starting at 2.99% APR. Your credit score will unavoidably play a large role in obtaining used boat financing.



6 Tips to Getting Used Boat Financing

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Use your money wisely by choosing the best boat mortgage rates for your budget. Photo courtesy of: Wonderful Machine

Knowing the overall affordability of used boat loans and understanding the requirements for used boat financing are crucial starting points. The key, however, is learning the best ways to get great used boat financing. Our review has compiled six of the best tips to navigate through getting used boat loans.

Obtaining used boat loans can be a confusing process. Still, obtaining great used boat financing rates is entirely possible. Our goal is to provide valuable and helpful information to assist you in getting used boat financing. Whether getting used boat loans or looking to refinance a boat loan, having a guide is key.

Adhering to the detailed guidelines in these six simple tips can help you obtain the best used boat financing rates to fit your lifestyle.

1. Do Your Homework

This process involves a bit of detailed research into your finances. As with all loans, used boat loans will certainly impact your current and future finances. Having an acute awareness of where your budget stands is crucial before attempting to get used boat financing. A thorough overview can be accomplished through the following steps:

  • Make a budget

Before obtaining used boat financing, make sure you have a detailed budget outlined. Be sure to include things like general maintenance and storage. This will help you identify the best boat mortgage rates for your lifestyle.

Discover Boating offers a comprehensive calculator to determine a monthly budget for a boat. BoatUS also offers a straight-forward calculator to help identify what levels of used boat loans can fit into a yearly budget.

  • Know your income

Take a look at your tax forms and your credit score to find your debt-to-income ratio. Your income and credit are big components in getting great used boat financing rates.

Free credit report websites like Credit Karma are great resources to safely and accurately view your credit score. Finding and correcting credit problems beforehand can go a long way in getting used boat financing.

  • Look at maximum and minimum used boat loans

This is a crucial part of looking at used boat loan rates. After analyzing your annual income, any outstanding debt, and your credit score, these numbers can be used to predetermine what used boat loans you can qualify for.

Different lenders will have different boat loan rates and terms. Find out if you can feasibly change your desired used boat financing rates and dollar amounts. By improving your flexibility, you also improve your chances of getting used boat financing.

Doing your homework means thorough preparation. Before looking for used boat loans, it is crucial to have a thorough understanding of where your personal finances are, and how used boat financing can fit.

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2. Find Loan Officers to Work with You on Used Boat Loans

While many loan officers are more than happy to help you fill out paperwork on used boat loans and boat refinance options, this is much different than working with you. Experts may suggest filling out paperwork at multiple lending offices to get pre-approval for used boat loans, but this may actually hurt your chances of obtaining used boat financing.

Included with every application for used boat financing is a credit inquiry. Credit inquiries are split into two separate categories:

Typically used by lenders when determining your level of risk. These inquiries stay on your credit report for up to 2 years and can actually lower your overall credit score.

Usually defined by a company using a credit report as a background check. These inquiries leave no lasting effect on your overall credit score.

While soft inquiries can be used when predetermining used boat financing rates, most lenders use hard inquiries instead. This means that every time you fill out a loan application, you could be dropping your credit score. Without meaning to, many consumers effectively self-sabotage their search for used boat loans.

To avoid this pitfall, look for loan officers who will be open and honest about the used boat financing process before filling out applications. Ask beforehand about whether the lending office uses hard or soft credit inquiries. Try to determine your likelihood of approval before applying for used boat loans.

Finding a loan officer to work with you while searching for used boat loans means finding someone who values your time, your effort, and most importantly, your credit score.



3. Utilize Local Banking Resources for Lowered Used Boat Loan Rates

Being a member at a local bank or credit union can have positive impacts on your chances of getting good boat mortgage rates. An established relationship can result in a bank or credit union being more willing to work with you on used boat loans.

Factors like credit score and debt-to-income ratio can possibly be tweaked and adjusted. While there is not a huge amount of room for change, some banks will adjust the 40% debt-to-income ratio to 50% for used boat loans.

Of course, personal loans typically require higher credit scores, so consumers searching for alternative used boat financing may want to keep this in mind.

The big benefit to getting a personal loan is the potential for a sharp decrease in the initial downpayment. While a 20% downpayment on used boat loans may be required through other lenders, a bank or credit union may only require 10-15%.

A previously established relationship with a bank or credit union may also increase the likelihood of finding loan officers who will actively work with you. Discussing financial terms like boat mortgage rates and used boat financing rates can be tricky. One way to make the process easier is to choose lenders you have an established relationship with.

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4. Partner with the National Marine Lenders Association

If going through a local bank or credit union is not a good option, another great resource for used boat loans is the National Marine Lenders Association. With the widest range of lending options, the NMLA strives to connect potential boat buyers to the best used boat loans for their specific needs.

With intense focus on providing boat-specific, competitive financing, the NMLA is a national organization which specializes in boat refinance options and boat loan rates and terms. Members of the NMLA include national and local banks, financial service firms, and even credit unions.

Becoming a certified NMLA member means focusing on making both used boat loan rates and new boat loan rates an integral part of a business plan. Lenders who partner with the NMLA are more likely to offer competitive pricing for used boat loans.

Not only can the NMLA provide lists of participating lenders, but they also offer instructive resources, like informative brochures on the used boat financing process.

The list of lenders provided by the National Marine Lenders Association cover all aspects of used boat loans, including boat refinance. For example, Blue Water Finance not only provides competitive rates on used boat loans; they also work alongside each lender to provide options to refinance a boat loan.



5. Consider Arranging Used Boat Financing Through a Dealer

Whereas getting used boat loans through banks and credit unions may require establishing a banking relationship, getting used boat financing through a dealership eliminates that step. Dealers typically employ Finance Managers to ease the lending process. Finance Managers have previously established relationships with lending services, and many of these involve National Marine Lenders Association members.

Additional benefits of using a dealer for used boat financing include:

Although used boat loans typically don’t come with lifetime manufacturer warranties, protection plans are still available.

  • Special finance programs

These finance programs can include a delayed first payment, lowered interest for a few months, or limited lower boat loan rates and terms.

  • Service departments

Used boat financing through a dealer can also result in access to their service department. As maintenance and upkeep is a big component in keeping used boat loans affordable, access to year-round service departments is a plus.



6. Look For Possible Tax Breaks

If you apply used boat loans toward a boat that has room for sleeping, eating, and restroom facilities, your used boat financing could pay off during tax season. This is primarily because United States tax code allows for what is called a Second Home Deduction.

Simply defined, a second home is a residence that you intend to occupy for at least a fraction of the year. While not everyone uses their boat as such, if a boat has the capability for an individual to potentially live on it, then the boat can be defined as a second home.

Using the Second Home Deduction means allowing for 100% interest deduction on a total combined mortgage amount up to $1.1 million. Of course, utilities, insurance and upkeep aren’t included as tax write-offs, but deducting interest on boat mortgage rates can result in significant money savings, raising the value of used boat loans.


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Conclusion

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There are wonderful recreational and social benefits to boat ownership. Photo courtesy of: Solidarity Credit Union

It can be difficult to say no to owning a boat. For recreation, social interaction, hobbies, and enjoying natural beauty, the array of benefits that come with boating are hard to match. While navigating through the process of used boat financing may seem difficult, utilizing an array of resources will help you find the best used boat loans for your needs.

Finding the best used boat loan rates includes taking a comprehensive approach to identifying your financial needs. Using our tips for getting the best used boat loans and financing options results in expert guidance throughout the entire process of finding boat loan rates and terms for your budget.

With the right tools, finding the best used boat financing is very much within reach.

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