6 MIN. READ

South Florida is one of the most popular spots for boating. Think a boat purchase is out of reach? Think again.

With recreational loans, you can purchase a boat, RV, motorcycle, or other leisure vehicle. These lending products can make fun vehicles accessible without putting a big strain on your budget.

The key is to compare your options and shop for a recreational lender offering low lending fees and advantageous interest rates.

Read on as we discuss recreational loans and share advice for securing affordable financing for your recreational vehicle.

What Is a Recreational Loan?

A recreational loan is similar to other loans except that people use them to finance vehicles used for leisure, such as RVs or boats.

These banking products allow you to cover the upfront cost of recreational vehicles and pay for these “toys” over time, making them more accessible. In most cases, your new boat, RV, or motorcycle will act as collateral for the loan, helping you secure better terms and interest rates.

Recreational loans typically have longer repayment terms than personal loans. Depending on the type of asset you’re financing, you can find terms that range from 10 to 25 years.

What Can I Finance With a Recreational Loan?

Recreational loans cover a wide range of vehicles. While the type of vehicles financed can vary from one financial institution to another, you’ll often find recreational loans for the following vehicles:

  • Motorcycles
  • RVs
  • Travel trailers
  • Campers
  • Go-karts
  • Off-road vehicles

For those who prefer the open water, recreational loans are available to finance vessels, both big and small:

  • Boats
  • Yachts
  • Sailboats
  • Jet skis
  • Wave runners

Secured vs. Unsecured Recreational Loans

A secured recreational loan uses your new vehicle as collateral. It’s a good option if you’re looking for a loan with a long repayment term and want to minimize the cost of borrowing.

However, recreational vehicles that depreciate quickly and used vehicles that aren’t in ideal condition might not qualify for a secured loan. In this scenario, an unsecured loan might be the better option.

Keep in mind that unsecured loans have higher interest rates. That’s why choosing a shorter term and setting a budget to repay your loan quickly is best.

Can You Finance Used Vehicles With a Recreational Loan?

Yes, many financial institutions offer recreational loans to finance used vehicles but keep in mind that financing can be subject to a few conditions.

For instance, the lender might request an inspection or survey to ensure they are financing an asset with a value matching the amount you’re borrowing. There may also be restrictions on the type and age of the used vehicle.

If you’re in the market for a used boat or second-hand RV, it’s best to reach out to a few lenders first and get a better idea of the kind of used vehicles they’re comfortable financing.

Are Credit Unions a Better Option for Recreational Loans?

Securing a recreational loan can be challenging because leisure vehicles tend to depreciate fast. In other words, recreational loans often represent a higher risk for your lender.

Depreciation shouldn’t be an obstacle to doing the things you love! While large banks are more likely to offer recreational loans with steep interest rates or rigid terms, credit unions tend to be more flexible.

Credit unions operate on a member-first model. Instead of looking at a handful of financial elements, credit unions typically consider a broader range of factors when making a lending decision.

Taking the time to gain a comprehensive understanding of a person’s finances often leads to a more favorable decision than a major bank’s lending approval process. Plus, credit unions are more likely to offer lower fees and advantageous interest rates since they operate on a not-for-profit model and redistribute any profits to their members.

Most credit unions offer a simple process for comparing recreational lending options, getting pre-approved, or applying for financing online.

How to Apply for a Recreational Loan

Applying for a recreational loan is similar for both land-based and water-bound toys. A thorough overview of your finances will help guide your purchasing decisions in the future.

Step 1: Budget

How much can you comfortably spend on a recreational vehicle? Before moving forward, take some time to research and determine what boat or RV fits within your budget.

A 20-foot boat can cost anywhere from $10,000 to $60,000. You can, of course, find more affordable vessels if you’re eyeing a small fishing boat or easily exceed this price range if you’re interested in a luxury yacht. An RV can cost as little as $10,000 or as much as over $400,000, depending on the class and features.

Use lending calculators to better understand how different purchase prices, interest rates, and loan terms impact your monthly budget. A good rule of thumb is to keep your total debt under a third of your income.

You should also account for additional expenses after the initial purchase:

  • You’ll have recurring maintenance costs.
  • Boats, RVs, and other large vehicles require storage when you’re not using them.
  • Don’t forget to factor in registration and insurance costs.

For instance, boat insurance costs 1.5% of the vessel’s total value annually. You should expect to spend around $100 a month insuring a motorcycle.

You should also factor in the storage cost if you plan to park your vehicle away from your home. The amount you pay will depend on the size of your recreational vehicle.

Step 2: Credit Check

Your credit plays a pivotal role in any lending situation, and recreational loans are no different. The higher your credit score, the better positioned you are to receive favorable loan terms.

Now is a good time to pull your credit report at AnnualCreditReport.com. If needed, look for any errors and dispute them with the corresponding credit reporting agency.

Next, you should look into boosting your score by paying off any outstanding debts and requesting credit line increases. Avoid opening new credit lines before shopping around for a recreational loan.

Step 3: Find the Right Lender

Comparing lenders is the best way to secure an affordable recreational loan with terms that match your needs. It’s also an opportunity to get a feel for the kind of customer service or online experience you can expect from a lender.

We highly recommend looking into credit unions when shopping around for a recreational loan. You’ll be more likely to get approved and benefit from low lending fees and affordable interest rates compared to a major bank.

Plus, credit unions always prioritize customer service. You can receive personalized advice and navigate the borrowing process with the help of a representative who can answer questions and help you figure out what’s best for your budget.

Some credit unions even provide members-only insurance discounts, such as guaranteed asset protection. You can also use its helpful tools, such as online applications and loan calculators, for a more convenient experience.

Step 4: Get Pre-Approved

Shop smart by getting prequalified for a recreational loan. Here’s why:

  • You know exactly how much you can afford. This gives you the power to negotiate and understand your financial situation thoroughly.
  • You won’t feel pressured to sign on the dotted line with a dealership. Salespeople will likely offer you financing options to pay for your new toy. Still, you can maneuver the sales process knowing you are already in a fantastic buying position since you did your homework.
  • Getting pre-approved shows you’re a serious buyer. Sellers will be more receptive and more open to negotiating.

Step 5: Close the Deal

With the hard work behind you, it’s time to close the deal and enjoy your new toy. Discuss any final costs, such as fees, insurance, and storage.

You’ll have to submit the required documentation to your lender and possibly schedule an inspection for your recreational vehicle. Once your lender has confirmed that the vehicle you’re purchasing matches the vehicle on your application and meets any requirements regarding condition and value, your lender will issue the funds.

You can then pay the seller, take possession of your new toy, and submit proof of insurance to your lender if you opted for a secured loan.

Key Points to Keep in Mind

If a recreational loan is in your future, know that it’s an excellent way to finance your leisure time fun. In summary, keep these points in mind as you move forward:

  • New or used. Recreational loans can be used to finance both new and used RVs, motorcycles, campers, boats, jet skis and more.
  • Plan flexibility. Choosing the right financial institution is critical because it impacts the cost of borrowing. We recommend finding a credit union with friendly repayment terms that work for your lifestyle.
  • Credit. Along with selecting the best lender, your credit score plays a significant role in your recreational loan. With a good score, you’ll enjoy lower interest rates.
  • Holistic planning. Remember to look beyond the sale sticker. Your new purchase will require upkeep, storage, insurance, and more. Make sure long-term costs fit into your budget.

It’s time to prioritize your health and wellness by enjoying more outdoor activities with a recreational vehicle. At Power Financial Credit Union, we offer financing on new and used boats, RVs, motorcycles, jet skis, and more with flexible terms! Plus, as a PFCU member, you’ll qualify for extra discounts on future loans.

Explore our recreational interest rates or visit one of our nearby branches to receive personalized borrowing advice.