Financing for boats, RVs and more

Summer is the season for the great outdoors, and getting a new toy, like a boat or an RV, is a dream come true for many people. But with rising interest rates, spikes in the cost of oil, and general economic uncertainty, you might be hesitant to make a big purchase right now.

Financing options, such as a secured loan, can make the purchase more manageable by spreading out the payments. But borrowing is not good for everyone. Look at your budget and factor in other expenses, like storage, maintenance, and gas.

Should you finance a big summer purchase?

Before deciding if and how you should finance, check with yourself why you want to make the purchase, says Jarrod Sandra, a certified financial planner based in Crowley, Texas. According to Sandra, customers are sometimes motivated by the idea of ​​a boat or an RV, not by the reality.

“I think mostly toys, you get that American dream feeling of waterskiing behind the boat every Saturday or being out in the beautiful wilderness,” he says.

Sandra, who once owned a motorhome, says that dream doesn’t always come true. Maybe you rarely have time to get in the water on the weekends, or the secluded campsite you imagined is actually loud and crowded.

For those who are sure they want to buy, whether to borrow money largely depends on your overall financial situation, says Marianne Nolte, a Fallbrook, Calif.-based certified financial planner and avid sailor.

“It all comes down to budgeting,” says Nolte. “It doesn’t matter whether you’re 25 and saving for your first home or whether you’re a 50-year-old man who’s well settled in his financial journey. You need to make sure that the money – in terms of flow, you don’t ‘will not harm your monthly expenses.

Nolte adds that just because you can afford a loan doesn’t mean you should automatically get one. Also, make sure you’re not giving up on bigger goals, like saving for retirement, to cover payments.

Both Nolte and Sandra recommend a test drive, such as joining a yacht club or renting an RV for the weekend, to get your feet wet before committing to the purchase.

Financing for boats, RVs and small toys

If you’re going to finance a big summer toy, you’ll probably need a secured or unsecured loan.

Secured loans are usually the most affordable option and are available from banks, credit unions, and some dealerships. Since the purchase itself serves as collateral, interest rates tend to be lower and you can often benefit from a longer repayment term, sometimes up to 20 years.

One of the best ways to get approved for a secured loan is to provide a down payment of at least 10%, says Michael Lax, executive vice president and head of marine RV sales at Bank of the West.

Credit history is also important. If you’ve financed a similar purchase in the past, such as with a car loan, it can make the approval process much easier, Lax says.

Unsecured Personal Loans are another financing option and are offered by online lenders, banks and credit unions. These loans don’t require collateral, so you don’t risk losing the item if you don’t repay. Lending decisions are based on creditworthiness, income, and existing debt, but annual percentage rates may be higher and repayment terms shorter, compared to a secured loan.

Some lenders allow you pre-qualify for an unsecured loanwhich is a smart way to check potential terms and compare different loans without affecting your credit score.

Borrowers considering smaller toys — think a personal watercraft or all-terrain vehicle — may want to consider a credit card. But especially in an environment of rising credit card interest rates, you’ll want to pay off the balance as soon as possible. The cost of purchase can also increase your credit utilization ratewhich could affect your credit score.

If you have good or excellent credit, a 0% APR card can be a smart choice. You won’t pay any interest as long as you pay off the card before the promotional period expires and the regular APR sets in.

Consider related costs

The purchase price is not the only expense to keep in mind. Depending on the vehicle you purchase, there are an assortment of related costs that you will want to budget for.

Storage and transport are among the most important. While small items may live in your garage, larger items like boats may need to be stored offsite in a marina or parking lot. You will also need to transport the item, which may require a trailer and adding a hitch to your car or truck.

Maintenance is another concern. Like cars, toys require regular maintenance to stay in good condition, whether it’s changing a tire, checking the oil or preparing the vehicle for colder temperatures.

Gasoline, insurance and one-time costs, such as mooring or camping fees, must also be taken into account in the purchase budget.

This article originally appeared on the personal finance website NerdWallet.

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