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Everyone knows that boats are expensive. That’s why so many people look for used boats instead of buying a new boat. However, even with a used boat you can still find yourself searching for a loan. Vehicle loans, and marine loans in particular, are a bit of a sticky subject, as there are multiple factors to consider when looking for a loan. This guide will help you understand the basics of boat lending so you can get your dreamboat and be on the waves in no time!

Lending Basics

Before getting specifically into boat loans, it is important to understand some basics that apply to all loans, no matter what they’re for. This information will help make sense of the specifics related to boat loans and how your finances will be affected.

The first thing you need to understand used boat loans are the terms used to describe loans. The primary terms you need to understand are interest rates, principal, and term. The interest rate is the amount of money that you’ll pay for borrowing the loan. A lower interest rate is better for consumers, as it means they are paying less for the loan. The principal is the amount of the loan that you are requesting. For example, if you want to borrow $10,000, that’s the principal. The term is how long you will have to pay back the loan, and it is usually expressed in months. For example, a five year loan will be described as 60 months. The amount you’ll pay over the course of your loan is the principal plus interest, and if you divide that total amount by the number of months in the term you’ll get your monthly payment.

Factors Affecting Boat Loans

Now that you’ve got a handle on lending basics, we’ll review some things that can affect your boat loan. All of these factors can contribute to determinations of eligibility, and will also influence the interest rate you’re offered. The interest rate reflects the level of risk the lender is taking on, so things that make the loan more risky for the lender will cause the rate to go up. Some of the biggest factors affecting a boat loan include:

Type of craft: Many lenders have qualifications on what type of boat they will lend money for. Make sure the boat you’ve got your eye on meets these qualifications. The closer you get to not meeting the qualifications, the higher your interest rates will be

Age of vessel: Lenders view older craft as more of a risk than newer boats, as they are less likely to be able to recoup their investment by re-selling your boat should you default on the loan if the boat is older. Therefore, newer boats will get better interest rates. The difference can be so substantial that it may be cheaper, both in terms of monthly payments and the total cost of the loan, to get a newer boat with a bigger price tag than an older one that is cheaper.

Credit History: One of the biggest factors affecting the cost of your boat loan will be your credit history. If you have a high FICO score and a history of making on-time payments, then you’ll be offered a better interest rate because lenders will view you as less of a risk. Late or missed payments, bankruptcy, and other negative remarks on a credit report cause the lender to see you as more of a risk. Taking the time to repair your credit history before seeking a boat loan can save many watercraft enthusiasts thousands of dollars over the course of the loan.

As you can see, there are a number of factors that affect the cost of boat ownership. Understanding these factors can help ensure that you get the best price on your used boat purchase, which means more money left to enjoy yourself!