How to get a used boat loan: 6 steps for a successful application

Key takeaways

• Used boat loans are offered by select banks, credit unions, online lenders and marine lenders.

• You could incur steeper borrowing costs if you finance an older boat.

• Some lenders also require higher down payments on used boat loans.

• A higher credit score can help you get a better deal on used boat financing.

Whether you enjoy setting sail for a day of relaxation or going deep sea fishing, a used boat can make those dreams a reality. That said, the outright cost of a boat isn’t a small expense. That’s when applying for a used boat loan can come in handy.

But there are some steps to follow before you apply to ensure you’re getting the most competitive offer for your situation.

How to get a used boat loan

Before applying for a boat loan, make sure you know your credit score, loan amount and the monthly payment you can afford, to narrow down your lender choices. Once you have these down, you can move forward with your application.

Step 1: Select your loan type

Used boat loans come in two forms — secured or unsecured. Secured loans require collateral, usually the boat itself. Putting an asset up as collateral means the lender can repossess it if you fall behind on loan payments.

Collateral isn’t required for unsecured loans, which make them riskier for the lender. Consequently, you’ll likely get a higher interest rate if you choose this form of financing, plus eligibility requirements may be more stringent.

Step 2: Research lenders

Used boat loans are offered through banks, credit unions, online lenders and marine lenders. When researching your options, take note of the eligibility requirements, loan amounts, interest rate, repayment terms and fees each lender charges on used boat loans. It’ll be much easier to decide which lender is the best fit when you’re ready to formally apply for a loan.

Step 3: Get prequalified

Many lenders let you get prequalified online by providing some basic information about yourself and your finances. By getting prequalified you can view projected loan offers and terms including the monthly payment and interest rate, without impacting your credit. Doing so also allows you to create a short list of lenders that could be a good fit.

Step 4: Gather your documents

You’ll generally need a copy of your driver’s license, proof of residence and proof of income when applying. Avoid scrambling to find them by preparing the documents you need beforehand. It’s also best to ask the lender about documentation requirements before applying to avoid hiccups or delays when they process your application.

Bankrate’s take:Utility bills, credit card statements and lease agreements all serve as proof of residence. Copies of your tax returns, W-2s, 1099s and bank statements can be used as proof of income.

Step 5: Submit a formal application

Apply with the lender offering the best fit for your finances and submit the requested documents. Be sure to complete the application in its entirety and review each entry before submitting. You can avoid costly errors or inadvertent denials by taking this extra step.

Step 6: Sign the loan documents

Once you’re approved for financing, review the loan documents. If any of the contents are unclear, ask the lender for clarification. Now is also the time to ask any questions you may have to avoid surprises later on. The final step is to accept your used boat loan.

How financing can be different for a used boat

Getting secured financing for a used boat loan becomes more challenging if you’re considering an older model. Depending on the vessel’s year, make and model, the lender may be reluctant to approve you if it thinks it won’t be able to recoup losses by selling it if you stop making payments.

Because of this, you may be charged a higher interest rate or be required to make a hefty down payment to minimize the risk posed to the lender.

Monthly payments for used boat loans in 2024

Here is a breakdown of how different loan terms and interest rates impact the total borrowing costs on a $35,000 used boat loan.

What to consider before getting a loan for a used boat

Before applying for a used boat loan, there are a few factors to keep in mind to help you select the best loan and ensure it is something you can comfortably afford.

• Credit score

  The lowest interest rates on used boat loans are generally reserved for borrowers with good or excellent credit scores. A lower credit score doesn’t automatically equal a denial, but you can expect interest rates and fees to be higher — and you may need a bigger down payment.
  
  That being said, checking your credit score and ensuring you meet the lender’s minimum requirements before applying is worthwhile to avoid spending a fortune on interest.

• Value of the boat

  Confirming the total boat cost and exactly how much you need to borrow is vital so you’ll know which lenders aren’t an option when shopping around. If you plan to roll origination fees and other costs into the loan, you’ll want to include those when calculating how much you need to borrow.

• Overall cost of ownership

  Before applying, it’s imperative that you know exactly how much you can afford per month. The best way to do this is to use a boat loan calculator to determine a purchase price and monthly payment that works for your budget.
  
  It’s equally important to include other boat ownership costs you’ll incur at the point of sale and for as long as you own the boat. These costs can include but are not limited to, registration fees and taxes, insurance, marina fees and storage costs. Also, don’t forget to factor in the cost of fuel and maintenance, along with fees for your boating license.

Bottom line

A used boat loan is worth considering if you can’t afford to pay upfront in cash. However, your credit score should meet the lender’s minimum requirements to ensure you get the most competitive rates and fees. Before applying, run the numbers to know exactly how much you can comfortably afford to borrow without tilting your budget.

Most importantly, research lenders and get prequalified to identify the best loan offers based on your credit profile. That way, you can apply confidently and have peace of mind knowing you’re getting the best deal on a used boat loan.