How to Finance a Boat with Bad Credit
Don’t let your bad credit bring you down.
Nowadays, bad credit doesn’t have to prevent you from making good investments into your leisure time.
That’s especially true if you’re looking to finance a boat.
Over 12 million Canadians go boating each year. That’s a lot of seafarers looking to make a splash by purchasing their own vessel.
But not all of those people have perfect credit scores. Many boat owners started out with bad credit just like you.
While bad credit can be an obstacle, there are tried and true methods that can take the mitigate the damage.
We’re sharing what you need to know to finance a boat with bad credit. Read on for tips that can save you money and make your dreams of owning a boat a reality.
Monitor your current financial situation
As with any purchase, it’s important to take a step back and monitor your financial situation before pulling the trigger.
You probably know that buying a boat isn’t a small investment. However, you might be surprised to learn just what goes into the cost of purchasing a boat.
Boat costs have nearly doubled since 2000 with the average cost per boat coming in at just over $35,000.
That’s not even counting the costs of maintenance, upkeep, storage, and insurance fees.
Needless to say, buying a boat is a serious investment.
The last thing you want is to get into a financing situation where you’re unable to make payments. This can send you even further into a bad credit spiral.
Make sure you’re ready to take on a loan and keep up with payments before deciding to finance a boat.
Temper expectations
We all have dreams of owning a 100-foot yacht. Sadly, for many of us, that dream rarely becomes a reality.
Keep your expectations in check when financing a boat with bad credit.
But just how bad is bad credit?
To give you an idea, credit scores range from 300 to 900. The credit score national average is around 650.
There are a few things you can expect if you happen to be under that magic number.
You’ll need to be able to incur higher monthly payments than people with better credit in addition to making a down payment.
When you finance a boat, the lower your credit score the higher the percentages are going to be on your loan.
Also, it’s important to be aware that applying for a loan is no guarantee of success. There are several factors that could contribute to getting rejected from a financing opportunity.
Those might include previous bankruptcies, current debts, lack of income or a bad history of paying off loans.
Banks are always on the lookout for red flags. You should try to pay off all current debts before starting your boat search.
There are many resources where you can research dealerships to learn more about purchasing a boat before making any decisions.
Use these resources before reaching out to make a loan application. The more you check your credit score, the worse your credit score gets.
Make sure you are prepared before making any inquiries.
Pay off your debt
In order to give yourself the best chance to finance a boat, you should focus on doing everything you can to improve your current credit score.
Though buying a boat is a long-term investment, it can be beneficial to also focus on the short-term.
Focus on any outstanding debts that might be negatively impacting your credit score. That means paying off your credit cards and any other debt that might be a present financial burden.
Banks will be more likely to accept your loan because you’ll be less burdened by other interest payments.
By managing your debts, you’ll save yourself money and give yourself the best chance to improve your credit score.
Why finance a boat?
Of course, this process isn’t all doom and gloom. Financing a boat offers some great benefits if you find yourself with bad credit.
Bad credit will take some time to rebuild. You get a chance to start the rebuilding process when you finance a boat.
You become more reliable in the eyes of the bank when you make consistent payments. You’ll be on your way to a higher credit score as long as you continue making payments and don’t default.
Financing a boat with bad credit isn’t as ideal as financing with good credit for a variety of reasons. Namely, you have to deal with subprime loans and higher interest rates.
However, financing can be the first step in getting your credit back on the right track.
Financing options
Now that you’ve decided to finance a boat, you need to make a decision on how you want to apply for a boat loan.
The two main methods of applying for a boat loan are through a financial institution or through a boat dealership.
Let’s look at a financial institution first.
Applying through a financial institution is the standard way to apply for a boat loan. However, there are barriers to getting a boat loan with bad credit.
Local banks might not have a great deal of confidence in your ability to make payments. As mentioned, they could be scared off by red flags in your credit history.
They also aren’t specialized towards boat loans. Boat loans only make up a small percentage of their total loans and they are less reliant on them as a means for business.
A better option is to try to get pre-approved for a boat loan through a specialized financial institution.
The ideal institutions are those that specialize in bad credit borrowers. That’s because they’re experts in giving pre-approved loans to people just like you.
Alternatively, you can try to finance a boat through a local dealership.
Dealerships usually offer as broader range of potential investments as financial institutions. Most boat dealerships have a large inventory which means you have many great choices when it comes to choosing your dream boat.
Using a dealership is also a great way to get approved for a bad credit loan. That’s because dealerships core business comes through selling inventory.
They are trying to sell their boats and thus have more of a reason to work harder to get loans pre-approved.
As you can see, there are several options in regards to financing so don’t get discouraged if you are initially denied by one lender.
What to expect
You’ll need several key pieces of information when applying for a loan.
You should be able to provide basic information about your finances to ensure trust between you and your lender.
Some bits of information that will be helpful to have are your income and work history, tax returns, expenses and a list of current assets.
You should also have basic information on your potential boat purchase. Pertinent information includes the make, model, year of your new boat.
Additionally, you should know what the bottom line is in regards to the cost.
It’s important to keep in mind hidden costs and fees. This can include taxes or necessary alterations that might impact the overall cost.
As a reminder, it’s important to have mitigated your debt and to have some savings when trying to finance a boat.
Payment expectations
There are a few expectations you should have when you finance a boat with bad credit.
For one, there are going to be higher interest rates. You could pay close to double the rate of those with a great credit score, with rates going potentially between 10 to 20 percent.
Additionally, you’ll want to have some money saved up in your account to place a down payment. Minimum payments range but you can expect to pay at least 10 percent of the overall cost of the boat.
You can have a greater chance of being approved if you can put a bigger payment down upfront.
Banks like to see more capital during a loan application. It gives them extra confidence to proceed with loans so the more money you can put down, the better.
In the long run, it’s inevitable to end up paying more than someone with good credit.
But financing a boat with bad credit is worth the expense because with each payment you will be one step closer to rebuilding your credit to a respectable number.
What’s next?
Your dreams of becoming a boat owner can become a reality even if you have bad credit.
Remember to review your budget, credit history, and rid yourself of debts before starting your process.
Once you decide to move forward, use your resources to find a financial institution or dealership near you. Make sure you have a clear idea of your payments and can handle higher interest rates on a consistent basis.
It’s important to keep in mind that bad credit can be fixed. If you do choose to finance a boat, it’s a great way to build back up your credit while also enjoying life as a boat owner.
Are you thinking about financing a boat? Talk to one of our staff to learn more and start your process today!