Credit Score Needs For Boats
When you’re getting your boat loan, you may be surprised to see two key factors that determine your boat loan:
- Interest rate for your boat may be higher than your car’s interest rate.
- You may need a higher credit score to apply for a boat loan or get a rate that is agreeable to you.
Why? A credit score indicates the likelihood that you will pay your loan on time. Since a boat is often seen as a luxury expense, the rates for boats are often higher than that for the essentials.
In the case of economic hardship, an individual is more likely to pay their loans that are important to their survival (cars and homes) rather than something that could be considered a hobby, like a boat. But, with a solid credit score (699 or greater) the odds of procuring a great rate from your financial institution is high.
Boats Can Usually Have Longer Loan Terms
They say a car loses half its value when it rolls off the lot, but what about a boat? Unlike an automobile, a boat’s value won’t depreciate as quickly once it hits the water. For most car loans, it’s not uncommon to owe more than your car’s worth towards the tail end of your car’s loan. This is called being underwater on your loan (no pun intended).
For boats, it’s a different story. You will often be able to receive a loan for a significantly longer term that than a car loan (84 Months Vs. 144 Months). Now you may be thinking, “If I’m underwater with my car after 84 months, then I’ll be sunk at 144 months with my boat!” But the longer loan term shouldn’t frighten you. The major difference is the lifetime of each vehicle and how they are determined. Initially, you're likely to use your car on a daily basis. In contrast, a boat is typically reserved for recreational purposes and is used only seasonally.
In determining a car’s value, you can often look at the year, make, model, and mileage. Boats are more complicated and really depends on motor hours and maintenance. Overall, the longer life cycle of boats means that they have a slower depreciation rate compared to cars.
Determining the Value of a Used Boat
Don’t let the boat you’ve had your eye on become your white whale. Make sure it’s worth the trouble by getting a marine survey to spot any potential issues with the vehicle. If you’re looking for a surveyor, reach out to your lender or insurance provider for a list of qualified specialists.
Extra Boat Costs
Having located your boat and secured a lender with a favorable rate, the next step involves budgeting for ongoing expenses. Simply parking your boat and setting sail isn't enough—you must account for future financial obligations, such as gas (given that boats can be expensive to fuel), maintenance equipment, gear, and the cost of a marina for docking. Despite these additional expenses, the investment is justified for a lifetime of adventure. When you are ready for the next step, online today with First Commonwealth. 1