If you’re ready to invest in a boat but aren’t sure where to begin, you may want to consider purchasing a used boat. This is often a much better financial decision than buying new, as boats depreciate up to 10 percent in their first year, LendingTree reports. By going with a used boat, you can often save thousands of dollars without sacrificing power or functionality — and luckily, they are no more difficult to finance than a new boat.

The basics of boat loans

According to NerdWallet, used boats will generally need to be financed with some variation of a personal loan. You can expect to pay off this loan in installments, typically between two and 15 years.

There are two main types of boat loans: secured and unsecured. A secured loan will use your boat as collateral. This type of loan will generally have lower rates, but you run the risk of losing your boat if you default. Secured loans are the best choice if you require a larger loan, or if you don’t qualify for an unsecured loan.

Unsecured loans don’t require collateral. As such, they generally have shorter terms and higher rates. Used boat loan rates vary depending on a number of factors, but you might expect them to range from four to seven percent, according to data from BoatUS.

Factors to consider

Buying a used boat typically means that you can take out a smaller loan as prices are lower and depreciation rates are steadier than when you buy new. The average cost of a used boat is approximately $9,440, LendingTree reports. You may even consider looking into more luxurious used boats, as these are often a better deal — their rapid depreciation means that you can purchase them while they are still relatively new, taking advantage of the drastic price drop.

Regardless of what type of used boat you decide on, there are a number of factors you should take into consideration. First, as with any type of loan, you’ll need to be mindful of your credit score. Ideally, this should be somewhere in the 600 or 700 range, but there are options available even if you have a lower credit score.

Additionally, there are certain details that you should be ready to report to your lender. Among these are your used boat’s year, model, manufacturer, and hull number, as well as its intended use. If you are purchasing a more expensive boat of $100,000 or more, you will likely be required to provide more information, such as your personal financial statements.

Options for financing your used boat

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Once you’ve decided on a used boat, you’ll have four main options for financing it: online lenders, banks, credit unions, and dealerships.

Online lenders are one of the more convenient options as you are able to complete the entire process without leaving your home. However, this option precludes you from having a genuine relationship with your lender, which can impede communication and make it difficult for you to find answers to any questions you may have. 

Banks offer competitive interest rates, and generally have no membership requirements for you to take out a loan. They do, however, have more stringent credit score requirements. Credit unions, on the other hand, do require a membership, but they also offer a highly personalized experience.

The most popular option for financing used watercraft is working directly with a dealership. In this case, the dealership handles the entire process, and can provide highly competitive interest rates.

Buying a boat is a big investment, but with the right financial plan, it doesn’t need to be intimidating. With a little research and a good lender, you can be sailing under the sun in no time.