Boat loans for older boats vs. new boats

Anton Petrus/ Getty Images; Illustration by Austin Courregé/Bankrate

Deciding to buy an older used boat versus a new one often comes down to the price tag, available boat loan options and how often you plan to use it. Financing a boat at a marine dealership for year-round use is very different from getting a loan to buy 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 need to pay a higher rate for a boat with some wear and tear. Like any type of loan, your credit and finances have a significant impact on the boat loan rates and terms you qualify for.

Boat loans for older boats

Lenders may be stricter if you’re financing an older used model since they present more of a financial risk. Repair and maintenance costs can add up, and that makes a secured lender less likely to consider outdated crafts. You may not be able to get a secured loan if the boat is outdated or shows a lot of wear and tear on it.

Pros

• You can get funds quickly if you choose an unsecured loan to buy your boat.
• A lower boat price usually means 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 available terms may make the payment unaffordable.
• The rates and fees are typically higher.

Boat loans for new boats

If you’re a boat enthusiast like an all-season fisher or all summer water warrior, a new boat may be a good choice to handle the constant use. Marine lenders may offer special deals for new models or add extra costs like storage, maintenance, and fuel to the loan amount.

Pros

• Interest rates could be lower for creditworthy borrowers.
• Longer terms help spread the cost of the boat to keep payments lower.
• New boat marine dealerships may offer financing incentives or upgrades for using their onsite lenders.

Cons

• Secured loans may take longer to fund and require more documentation.
• A down payment may be required.
• You may not qualify with a low credit score.

Financing a used vs. a new boat

Whether you’re buying new or used, boat loans come in two types: secured and unsecured.

Secured loans are more common with new boats because you can borrow higher loan amounts over longer terms. Unsecured loans don’t use your boat for collateral, which means you qualify based on your credit and finances. An unsecured loan may be an easy way — and sometimes the only way — to finance an older used boat.

Secured boat loans

A secured loan uses your boat as collateral, which means the lender can repossess it if you default. That extra security allows the secured boat lenders to offer terms as long as 20 years and at lower rates than unsecured loans.

Secured boat lenders tend to scrutinize the make, model, year and features more closely. A marine surveyor inspection may be required to prove the boat is safe.

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

Unsecured boat loans

The most common unsecured boat financing option is a personal loan. Funds can be used for any purpose, which means lenders don’t consider the type of boat you’re buying for approval. While it’s not impossible to finance an older used boat, you could be charged a higher interest rate than you would be with a more recent model or newer boat.

Personal loan lenders don’t typically offer terms longer than seven years, which could make for a much higher payment than secured boat loans. Unsecured personal loan rates may also be much higher, especially if you have fair or bad credit.

Should I finance a new or used boat?

Look over the lender’s eligibility requirements and check your credit score before you apply to confirm you qualify. Most boat loan lenders require a good to excellent credit score for approval, so build your credit before applying if possible.

Use a boat loan calculator to estimate payments. Add in a buffer for origination fees or any additional features you know you’ll want with your boat — this will help you determine how much boat you can afford.

The process to get a boat loan is similar regardless of whether you buy used or new. You’ll complete an application and document your income and address, and the lender will pull your credit. Secured loan lenders will review your boat’s age, make and model to determine what terms to offer you.

Before making a final decision, consider how much money and time you’ll spend storing, maintaining, transporting and fueling the boat. General recreation and infrequent trips may mean it’s better to choose a used boat. Many are still reliable, and you will save money by avoiding the new boat sticker price. Compare the cost of renting rather than buying if you only plan to use the boat occasionally. The ongoing costs may add up, especially if you use the boat on a regular basis.

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. Excellent credit loan rates are also much less than rates for lower credit scores. A used boat may be better to finance with a personal loan, so you don’t have to jump through hoops regarding the age or condition of the boat.

Next steps

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

Research interest rates and terms in addition to loan amounts, fees and perks. Get prequalified with each lender you are interested in to get an idea of what you may be eligible for without hurting your credit.