Get a Boat Loan With Not So Good Credit

Nothing is better than floating on the water, hearing the waves hitting the side of your boat. You could be fishing from the back of a pontoon boat. Or you could get an adrenaline shot by racing in a speedboat. With so many boating options to choose from, you should be able to find one to suit you.

But there is a problem. These vessels can be very expensive. Most pontoon boats will start at $18,000. However, they can cost as much as $70,000. Or, if you are into luxury boating, costs could be upwards of half a million dollars.

Because of this, it’s common to need a loan to make your boating dreams come true. But this can present a new set of challenges. Many banks will be unwilling to lend to people that have a low credit score. But that doesn’t mean that getting financing is impossible. You just need to explore a few alternative paths. Here are some of the things to consider.

Alternative Financing Options

There are a few alternative yacht loan financing options that you might want to explore. It’s worth considering the pros and cons of each. This will let you find the right one for your desires.

Hard Money Boat Lenders

One of the most popular types of boat loan options is a hard money loan. This is a collateral loan. This means that the loan will be secured by the boat. If you fail to make payments, the lender will be able to take the vessel.

There are a few reasons why people like this type of loan. Often, this type of loan is engineered to suit you. For example, the lender will look at your situation to decide how much they are going to offer you. You might be able to negotiate more favorable terms.

Another big benefit is these lenders tend to be willing to make loans in a wide range of circumstances. If you have a poor credit score, it won’t be a problem. Also, this type of loan is ideal for people with unverifiable income.

But there are a few downsides to consider. To compensate the lender for their increased risk, these loans tend to attract higher interest rates. Additionally, these will often require you to have a higher cash deposit. Sometimes, there might be a limit on the type of boat you can buy. For example, there might be a minimum value that you need to spend.

Home Equity Loan

Another option that you might want to consider is a home equity loan.  This will let you borrow against the value of your home. Usually, you will need to do this when you have a mortgage. For example, imagine that your home is worth $225,000. But the value of your mortgage is $200,000. This means that you might be able to take out a $25,000 home equity loan.

It should be noted that these types of loans might require a credit check. However, the biggest downside is the need to use your home for collateral. If you are unable to make repayments, the lender might be able to seize your house. This is a big risk, especially if you are having financial trouble.

Variable Rate Loans

A third option to consider is a variable rate loan. Unlike a hard money boat loan, which tends to be at a fixed interest rate, these interest rates will change. Often, they will be determined by market conditions. These loans also tend to have longer terms. This can be good news, making it easier to buy more expensive boats. But it also means that you will end up paying more interest over the course of the loan.

Another element to consider is the potential difficulty of keeping up with loan repayments, especially if they are increasing month over month. Often, these loans will need some kind of backing. This means that there is a chance that you will lose your boat if you default.

Personal Loan

You can also consider taking out a personal loan. Depending on the lender, these might be unsecured. This means that you don’t need to put up any collateral and risk losing your boat.

But there are a few big downsides. Namely the fees that you will be expected to pay. You will often need to pay to create the loan. This is known as the origination fee. Also, you will have higher interest rates. In some cases, this can be over 35 percent. These types of high fees are considered excessive and increase the chances that you will default.

Figuring Out How Much You Need

Before you can apply for a loan, you need to know how much money you need. When you’re doing this, factor in the additional costs of owning a boat. For example, you might need to get a trailer to haul it and a place to store it.

Applying for a Boat Loan

Applying for a boat loan follows the same process as you would when applying for any other type of loan. Namely, you will need to gather the appropriate documents and fill out some paperwork. Your lender should make it clear what information you will need to provide.

It should be noted that part of this process might involve a soft credit score check. This is a way for the lender to know the type of customer that they are dealing with. This check will not appear on your credit score.

Once the application is complete, you will need to wait for a few days while the loan is assessed. Once you have been approved, the money is transferred to your account and you can buy the boat.

How long it will take for you to be approved will depend on the lender. Usually, though, an alternative financing loan will be quicker than going through the bank. You might be able to get the money within days.

Boost Your Odds of Getting Approved

As you can imagine, many lenders are skeptical about lending to someone with a poor credit history. There are a few ways that you will be able to overcome this.

First, it’s important to remember that your credit score isn’t fixed. You will be able to take some actions to improve it. The best place to start is by looking at your credit score. You are entitled to a free copy once a year. This will let you check the balances owed and correct any mistakes. You should also try to avoid maxing out any credit cards and make repayments on any debts you owe. Remember, it will be a while before you start to see any improvements in your credit score.

The next thing to do is get a cosigner, preferably someone with a strong credit score.  This is someone who will agree to take ownership of the debt if you default. This is a big responsibility, so make sure that they know what they are signing up for.

Another good tip is to make a substantial down payment. This reduces the amount that you will need to take out a loan for. The amount that you will need to save up for a deposit will depend on the type of boat you want to purchase. Generally, though, it’s a good idea to aim for between 10 to 20 percent.

Finally, you might want to try to explain the bad credit to the lender. Sometimes, this can help them to see why you would be a good candidate for a loan. For example, you might have lost your job, causing you to draw down on credit cards and run up debt. But, now that you’re back in the workforce, you have a reliable stream of income.

Picking the Right Lender

Once you start investigating alternative yacht loan financing, you’ll find that there are plenty of lenders to choose from. At first, it can be difficult to know which one you should pick. But there are a few important areas that you need to look at. First, you’ll want to look at their reputation. Sadly, many lenders might want to rip you off. Because of this, make sure to pick someone who is respected and has a history of benefiting customers.

The next thing to look at is the interest rates. As we mentioned, because you have poor credit you can expect to end up paying a little more. This is expressed in higher interest rates. However, it’s still important to make sure that you are doing your own research. Contact multiple lenders and see what kind of rates you are getting.

Another important element to consider is how long the loan will last. This is typically measured in months. Once you understand this, you will be able to judge how much you will be expected to pay each month. This is a good way to compare multiple loans and find the best deal.

Final Thoughts

Getting a boat can be a great way to enjoy the time you are spending on the water. It can be the ideal way to bond with your friends and family. While you might have a low credit score, you shouldn’t let this hold you back. There are plenty of alternative yacht loan financing options that you can use. So, start exploring some of these options today so you can be out at sea tomorrow.