Boat ownership is a dream that many harbor. Poor credit history may appear like turbulent waters standing between you and your next boat. Fortunately, in Canada there are boat loan options for all credit types, including bad credit. Understanding how your poor credit score impacts marine financing is the first step in navigating these waters.
When lenders evaluate your application, they will assess more than just your bad credit score. Other factors include recent monthly payment history, current debt load and your income history. This gives the lender an idea of your reliability as a borrower. While you may not qualify for your dream boat without a substantial down payment, financing options may be available for a less expensive boat to get you out on the water and build credit so you can qualify for a lower interest rate down the road.
The Harsh Reality: Setting Your Expectations for Term and Rate
Having bad credit doesn't mean you won't be able to secure boat financing options, but it is crucial to set realistic purchase expectations. Here are some potential finance realities to prepare for:
- Higher Interest Rates: Bad credit boat loans usually go hand-in-hand with higher interest rates. This is a lender's way of compensating for the risk they undertake by lending to borrowers with a poor credit history. Mid-tier credit situations tend to fall in the mid to high teens, but it is not uncommon to see bad credit boat loans offered at 29.9%. This might be the best boat financing option that you qualify for until you're able to prove some positive payment history on the road to better interest rates.
- Stricter Loan Terms: You may be offered limited flexibility for your boat loan term length. Some lenders may extend the boat loan term to keep your monthly payments affordable, while others may shorten the term to mitigate long-term risk. Ultimately, you may not have a choice in the matter other than to accept or decline what the lenders offer.
- Large Down Payment: While some lenders might offer bad credit boat loan options without a down payment required, in some cases you might have to provide cash down to qualify for a boat loan; especially if you're shopping higher priced boats. This reduces the lender's risk and may help you secure more favorable loan terms.
- Higher Monthly Payments: Bad credit boat loans typically come at a higher rate, and thus a higher payment. It is important to make sure that the total loan amount for the boat you're financing fits a regular payment that you can afford to pay.
- Limited Options: The lender may be strict on the book value of the boat being financed which can greatly limit the number of options that would fit your approval. In addition, most lenders will use your boat as collateral to offset the finance risk. Unsecured loans on boats are rarely offered for applicants with bad credit.
Pro Tip: Many lenders use JD Power as the basis for their watercraft valuation. As they provide public values on many makes of new or used boat, you can get a head start by searching up the boat here: JD Power Personal Watercraft Used Values and New Prices
The Impact of a Boat Loan on your Credit Score
As a positive, your boat financing journey may become an opportunity to improve your credit score. Timely repayments on your boat loan purchase will show on your credit history if reported to a bureau. Even if your credit is not reported to a bureau, your financing relationship with the lender may help you secure a lower rate boat loan in the future. Consistency is key.
Keys to keep your finance goals on track:
- Ask if Your Lender Reports: While reporting to credit can be helpful, it is not mandatory for a lender to report loans. Ask how often and who the lender reports this specific loan to so that you know how beneficial your boat loan could be to improving your bad credit score.
- Monitor Your Credit: Regularly check your credit report for errors and to keep track of improvements.
- Make Timely Payments: Consistently making boat loan payments on time improves your credit history. Remember that it is two steps forward, one step back. Any late or missed payment will negatively impact your credit far more than any on-time payment will help.
- Avoid Deferring, Taking New Debts & Multiple Credit Hits: While paying off your boat loan, it's important to ensure that you are taking the right steps to improving your bad credit. While it may be tempting to defer a payment in the event that hard times arise, it could impact your loan as well as future loans. Accumulating new debts may also affect your ability to repay or even worsen your bad credit. Applying for other loans in Canada will lead to a hard pull on your credit. When these hard hits add up, they can have a negative effect on your credit score.
Paying Your Bad Credit Boat Loan
Having a finance plan for paying off your boat loan is crucial to successfully manage your bad credit loan. Here are some strategies:
- Don't Overburden Yourself: When deciding between boat loans, remember that you're building something here and climb the ladder with that mindset. Make the shiny, top-end model your dream destination but stay based in reality with your current situation.
- Budget Wisely: Include the boat loan payment in your monthly budget. Make it a priority to always have sufficient funds to make the payments on time. If your lender has automatic payments, ensure that the payment amount is readily available in your account at the time is should be pulled.
- Extra Payments: If possible, make additional contributions towards the boat loan. This will drastically reduce the overall interest you'll pay. Even small extra payments tacked on to your loans can add up to make a difference and help you to pay it off sooner. Any reputable lender in Canada allows extra payments without hidden fees or penalties.
Where to Find the Best Boat Loans in Canada
While you have a number of options throughout Canada offering financing services; it is important to get the best loan approval - especially when dealing with bad credit. Reliable boat loans don't have to be high pressure or break the bank. Reputable dealer brokers and lenders will offer loans with a smooth and easy to understand finance process.
Our partners at Revival Powersports have access to the best boat financing options for bad credit in Canada. They offer boat loans without a minimum credit score requirement and process financing within one business day. We only partner with the best and when looking to finance a boat, they will get you the best loan available.
In Summary: Knowledge is Power
Bad credit doesn't have to anchor you away from your boating dreams. By setting realistic expectations and using a boat loan as a tool to improve your credit, the horizon doesn't seem so far off. By understanding the financing process and securing a boat loan from a reputable source, you'll be setting yourself up for success downstream. Thank you for reading and be sure to visit our other blog posts for more keys to boat financing!
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