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Dr. Don TaylorGetting a boat loan with bad credit


Dear Dr. Don,
I have very bad credit and I need to borrow $5,000 to $10,000 for a boat. Despite my bad credit and recent job change, I have collateral. I own a 1997 BMW 328i free and clear. How would I go about getting a loan, and what type of loan would this be considered? -- Glenn Gulf

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Dear Glenn,
I spent a little time trying to figure out why this is such a priority for you. My personal preference is to have friends who have boats, vacation homes, vegetable gardens, etc., rather than to actually have these things myself.

The Bankrate feature, "Expensive sports toys and how to pay for them," does a really good job of describing the difference between dealer financing, bank financing and personal loans for boats -- even for guys like you with bad credit.

The boat should be its own collateral on the loan, and you shouldn't need to tap the equity in your car to buy the boat. Getting an auto loan to tap the equity on a 6-year-old BMW when you have bad credit is next to impossible.

I looked at two Internet lenders: PeopleFirst and E-Loan. PeopleFirst offers refinancing on used vehicles but requires that the car be less than five years old. E-Loan will consider a 1997 car with less than 75,000 miles but will only give you a 36-month loan on a car this old, and it's meant to be a refinancing, not a source of new money. With poor credit, the loan's APR would range from 8.99 percent to 19.99 percent.

You could sell the BMW, buy the boat, and use the remaining cash as the down payment on a new or used car. A large down payment will help convince the lender to approve your loan. The interest rate will still be high but you should be able to do better than 9 percent to 20 percent.

In the end, it's easier to get a car loan with bad credit than it is to get a boat loan with bad credit.

-- Posted: Jun 18, 2003




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