How to Finance a Boat With Poor Credit

Lady Moura

Financing a boat with poor credit may sound difficult, but if you follow these instructions, it doesn't have to be. With a sufficient down payment, almost anyone can get financed to buy a boat, regardless of their credit situation.

Difficulty:

Moderately Challenging

Instructions

Things You'll Need

• Credit report
• Yacht broker

1. Determine your exact credit situation. It is important to know exactly how lenders will view your situation. You might not be as big a credit risk as you think. Generally speaking, conventional marine lenders are willing to lend to anyone with a 680+ credit score and 5 percent down. With 20 percent down, most credit score requirements go out the window, too (see Resources below).

2. Find a yacht broker. This process will be much simpler with professional help. A yacht broker won't cost you anything; the boat seller pays his commission. You can find a yacht broker online, but it is better to visit the yacht brokerage in person. Find the largest yacht brokerage in your area and introduce yourself to the sales manager. Explain your situation and he will assign one of his brokers to assist you.

3. Find a boat. You and your yacht broker will have to assemble a large list of potential boats, because finding a seller willing to work with a buyer who has bad credit can be challenging. Use yachtworld.com (see link below), which facilitates 85 percent of the used boats sales in the United States.

4. Make an offer on a boat. Your yacht broker will help you write a formal offer. You won't be able to buy a boat without one. If your credit is so poor that you don't qualify for conventional marine financing, make your offer contingent upon acceptable seller financing. Be prepared for several rejections as most sellers are not normally amenable to seller financing. The offer must be accompanied by some sort of refundable deposit. The standard deposit for a yacht sale is 10 percent of the offering price, though this is negotiable.

5. Get your story straight. When you find a seller willing to consider seller financing, he is going to want to know why your credit is a wreck. If you tell him you're just a deadbeat who doesn't like to pay bills, you won't hear from him again. Make sure you have a solid explanation for your situation. In my experience, a surprising percentage of boat owners have ex-wives, so they are generally sympathetic to explanations involving divorce/relationship problems. Loss of employment is also an acceptable excuse, as long as you have a job now and can prove your ability to make the boat payments.

6. Get a marine survey. Once you come to terms with the seller on the price and financing, you want to have the boat checked out by a professional to make sure it is seaworthy. You will also need the survey to obtain insurance on the vessel. To find a marine surveyor in your area, click on the link below and it will take you to the Society of Accredited Marine Surveyors (SAMS).You will also want a sea trial. This is where you take the boat for a test drive with the surveyor to make sure it runs well and everything works.

7. Accept the boat. Once the boat has gone through survey and sea trial, the surveyor will provide you with a written evaluation of the vessel as well as a fair market value. It will include a list of the discrepancies found during the survey, and you are well within your rights to ask the seller to fix the problems or reduce the sale price by the amount required to fix the problems. The seller is well within his rights to refuse. When you have reached a final agreement, you will sign an Acceptance of Vessel and proceed to closing.

8. Close the sale. Your yacht broker will handle all the paperwork. You will want to have your insurance in place before you close. You will obtain the title to the boat and the seller will record a Preferred Ship's Mortgage against the title with the U.S. Coast Guard. This allows him to re-possess the boat if you miss a payment.

Tips & Warnings

• Be patient and persistent. Think about the leap of faith you are asking a seller to make and put yourself in his shoes.

• If the surveyor's report indicates the boat is not worth what you are paying for it, renegotiate the price or walk away. Don't pay more for the boat than it is worth!

Resources

• YachtWorld.com
• SAMS
• Credit Reports