No matter the type, model or year, a boat for most is a hefty expense that requires financing. Even though new boats are generally more expensive than used boats, the type of loan you take out and your credit situation will ultimately determine how much you’ll pay over the life of the loan.

Most lenders and financing companies don’t differentiate between used and new boat loans. The primary difference between new and used financing will depend on the lender’s eligibility criteria and the price of the boat. This impacts the repayment timeline, the monthly payments and the potential interest accrual.

Financing a used vs. a new boat

While the process of applying for both a new and used marine craft loan will look similar, some lenders may be more stringent if you’re financing an older, used model.

This is because the older models could present more of a risk to the borrower financially due to potential repair and maintenance costs, especially if the model’s technology or mechanics have outdated standard maintenance practices.

It’s also not unordinary for a lender or institution to be hesitant due to the potential of the model becoming obsolete, which could result in the borrower halting their monthly payments.

While it’s not impossible to finance an older used boat, you could be charged a higher interest rate than you would be with a more recent model or newer boat. It’s also common for lenders to require a downpayment between 10 to 20 percent to get approved to minimize risk.

Is it better to finance a new or used boat?

Like most financial decisions, whether it’s better to finance a used or new boat is entirely dependent on personal and financial factors. If you’re looking to cruise the lake recreationally on a pontoon during your weekend lake house visits, then an older model may make more sense if you’re looking to save money.

If you’re financing a boat for work or monetary purposes, financing a newer model could make more sense in the long run to avoid frequent technological and mechanical upgrades.

It’s also wise to consider the longevity of the craft you’re looking to finance. If you’re concerned with the mechanics of an older model becoming obsolete or hard to repair, it may be less expensive in the long run to finance a newer version of the same model or to finance a new boat altogether.

Financing a new boat

There’s no one-size-fits-all when it comes to taking out a loan, but there are things that you can do to determine which is the best option for you. Here are a few drawbacks and advantages to be aware of before you get your heart set on that new model and sign on the dotted line.

Pros

  • Interest rates could be lower for creditworthy borrowers.
  • Long-term maintenance costs may be less expensive for new boats.
  • Lenders are likely to be less stringent with what you can use the funds for should you meet the eligibility requirements.

Cons

  • The overall cost of the loan will likely be more than a used boat loan.
  • Higher monthly payments depending on the size of the loan.
  • For most lenders, an excellent credit score is required for approval.

Financing a used boat

While it may seem cheaper on paper, financing a used boat may not be the best option for your financial situation. Here’s what you need to know before ruling out a loan for a used boat all together.

Pros

  • The overall costs can be less for a used loan.
  • The value of the boat may be higher if the seller allows for price negotiation.
  • Depending on your credit, the price of the boat and the lender, interest rates could be lower.

Cons

  • Some lenders may not offer loans for older boats.
  • Used boats may pose more of a long-term financial risk.
  • Potential maintenance costs may offset the overall value of the loan.

What to know before financing a boat

Before applying for a boat loan, look over the lender’s eligibility requirements and make sure you meet the minimum criteria to qualify. You’ll also want to ensure your credit is in a good spot; no matter the make, model or year, most lenders and institutions require a good to excellent credit score.

Once you know where your credit stands, determine exactly how much you need to borrow down to the dollar amount to avoid over-borrowing. If you overborrow, you’ll be charged interest for funds you didn’t even need in the first place. This increases the total amount you pay over the life of the loan in interest accrual alone.

Before making a final decision, consider where your desired marine craft stands in terms of necessary upgrades and maintenance costs and if there’s a potential for newer models to come out in the near future.

If you think you could be tempted to upgrade shortly, it’ll be best to wait until the model release. This will help you avoid the hassle of trying to find a buyer willing to pay your exact amount or paying for two loans at once.

Is it easier to finance a new boat?

It could be easier to finance a new boat, but only if you have stellar credit and can prove to the lender that you’re able to make the monthly payments. A used boat isn’t necessarily always harder to finance; it just depends on the age of the boat and the lender’s restrictions.

If the boat is older, then it could be more difficult to find a lender willing to approve you for a loan, but that isn’t the case for most used boat loans. It can be just as easy to finance a used boat as it is a new one.

How to get a boat loan

Boat loans are available at a number of financial institutions, from banks and credit unions to online lenders and marine financing companies. If you have excellent credit, you’ll likely get the best rate with an online lender. But, if your bank or credit union allows you to borrow for a boat or related expense, you’ll want to consider that option as well.

Some banks and credit unions offer member benefits and discounts to existing customers, like interest rate discounts for enrolling in autopay or the ability to change your payment date.

Regardless of where you get your loan, ensure that it allows for the funds to be spent on marine craft and if the model you’re after is eligible for financing. Some lenders have stricter requirements than others and some may not allow for boat financing at all or only allow it under certain conditions.