Boat Loans for Older Boats vs. New Boats: What You Need to Know

The decision to buy an older used boat instead of a new one often comes down to the price tag, the boat loan options available and how often you plan to use it. Financing an expensive boat from a marine dealer for year-round use is very different from obtaining a loan to purchase a used boat from a private owner for weekend fishing trips.

Lenders typically offer longer terms and lower rates for new boats, while you may have to pay a higher rate for a boat that has seen some wear and tear. As with any type of loan, your credit and finances have a major impact on the terms of the boat loan you qualify for.

Financing a used versus a new boat

Whether you’re purchasing a new or used boat, there are generally two types of boat loans: secured and unsecured.

Secured loans are more common on new boats because you can borrow higher loan amounts over longer terms. Unsecured loans don’t use your boat as collateral, meaning you qualify based on your credit and finances. They can be an easy 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, meaning the lender can repossess it if you default. That extra security allows secured boat lenders to offer terms of up to twenty years and lower rates than unsecured loans.

Insured boat lenders tend to scrutinize the make, model, year and features more closely. An inspection by a marine inspector may be required to prove the boat is safe.

Like new cars, new boats quickly lose their value, making used boats less attractive to lenders. It can be more difficult to finance an older boat unless you opt for an unsecured loan. Alternatively, lenders may require large down payments or charge higher rates and fees to cover their risk.

Unsecured boat loans

The most common option for unsecured boat financing is a personal loan. Funds can be used for any purpose, meaning lenders will not consider the type of boat you purchase for approval. While it is not impossible to finance an older used boat, you may be charged a higher interest rate than a later model or newer boat.

Personal loan providers typically don’t offer terms longer than seven years, which could mean a much higher payment than secured boat loans. Unsecured personal loan rates can also be much higher, especially if you have fair or poor credit.

Financing a new boat

If you are a boating enthusiast, such as an all-season fisherman or an all-summer water warrior, a new boat may be a good choice to handle the constant use. Marine lenders may offer special deals on new models, or add the cost of extras such as storage, maintenance and fuel to the loan amount.

Positives

• Interest rates may be lower for creditworthy borrowers.
• Longer terms help spread the cost of the boat, keeping payments lower.
• New marine dealers may offer financial incentives or upgrades for using their local lenders.

Cons

• Secured loans may take longer to finance with more documentation.
• A deposit may be required.
• You may not qualify with a low credit score.

Financing a used boat

Lenders may be stricter if you finance an older, used model as they carry greater financial risk. Repair and maintenance costs can add up, making a secured lender less likely to consider outdated trades. You may not be able to get a secured loan if the boat is outdated or has a lot of wear and tear.

Plus points

• You can get money quickly if you choose an unsecured loan to buy your boat.
• A lower boat price usually means that you borrow less and have a lower monthly payment.
• No down payment if you choose an unsecured loan.

Cons

• Some lenders may not offer loans for older boats.
• If an unsecured loan is needed, the shorter loan available may make the payment unaffordable.
• The rates and fees are usually higher.

What you need to know before financing a boat

Before applying, review the lender’s eligibility requirements to confirm your eligibility and check your credit score in advance. Most boat loan lenders require a good to excellent credit score for approval.

Use a boat loan calculator to estimate payments to ensure they fit within your budget. Add a cushion for start-up costs or any additional features you know you want with your boat.

The process of getting a boat loan is fairly similar regardless of whether you buy used or new. You fill out an application, document your income and address, and the lender pulls your credit. Lenders of secured loans evaluate the age, make and model of your boat to determine what terms they can offer you.

Before making a final decision, consider how much money and time you will spend storing, maintaining, transporting and fueling the boat. Running costs can add up, especially if you use the boat regularly.

Is it easier to finance a new boat?

It may be easier to finance a new boat if you have excellent credit and solid finances. A used boat may be better financed with a personal loan, so you don’t have to jump through hoops about the age or condition of the boat.

How to choose between a new and used boat loan

As with most financial decisions, whether you should buy a new or used boat depends on how you plan to use the boat. General recreation and infrequent trips may mean it is better to choose a used boat. Many are still reliable and you will save money by avoiding the new boat sticker price. Compare the costs of renting versus buying if you plan to use the boat only occasionally.

Next steps

Boat loans are available from a number of financial institutions, from banks and credit unions to online lenders and marine financing companies that are on-site at dealerships. When looking for boat loans, compare offers from at least three lenders to ensure you get the best terms and rates available.

Research interest rates and terms, in addition to loan amounts, fees and perks. If possible, get pre-qualified with every lender you come across to get an idea of ​​what you might qualify for without hurting your credit.