After processing almost a million recreational loan applications, one of the biggest lessons I’ve learned is that recreational financing is different from other types of financing.
Most consumers are familiar with mortgages and auto loans. While there are some similarities, there are also some big differences when you’re financing a boat, RV, motor home or other recreational asset. The transactions can vary tremendously, and the borrowers themselves are far more diverse than many people assume.
Ultimately, successful recreational lending requires an understanding of the borrower, the collateral and the transaction, not just a credit score.
Financially Strong Borrowers Still Choose To Finance
One thing that surprised me early on was how many financially strong borrowers intentionally choose financing even when they could afford to pay cash.
People sometimes assume recreational financing is primarily about whether someone can afford to pay cash for something. Our experience has been much different. Many borrowers simply want to preserve their liquidity rather than put a significant amount of capital into a recreational asset.
There can be other financial considerations as well. But the larger lesson is that the decision to finance doesn’t necessarily indicate that someone lacks the resources to make the purchase outright. Financing can be an intentional financial decision.
That matters because it challenges the tendency to make assumptions about a borrower simply because they are seeking a loan.
They Aren’t Really Financing A Boat Or RV
What I enjoy most about recreational financing is that people aren’t really financing just a boat or an RV. Typically, they’re financing how they want to spend their time.
A home or automobile is generally a necessity. You need a car because you have to get to work. Recreational purchases are different.
Someone might buy an RV because they want to travel across the country with their spouse. They may want to take their grandchildren on a weekend trip or visit a national park. Someone might buy a boat because they want to go to the lake and spend time with their family.
They’re not financing a necessity. They’re financing how they plan to enjoy their free time.
That creates a different borrower mindset and a different transaction than you see in many conventional forms of consumer lending.
A Credit Score Doesn’t Tell The Complete Story
Credit score is important. But one of the biggest lessons we’ve learned is that it needs to be considered alongside the borrower’s broader financial picture.
That means looking at income stability, existing debt obligations, credit history and payment history. How much liquidity does the borrower have? Are they bringing equity to the transaction through a trade-in or down payment? How much are they financing? What kind of collateral are they financing?
All of those things contribute to the transaction.
One traditional assumption that can be misleading is treating every borrower below a particular credit threshold as though they represent the same risk.
There can be a significant difference between someone with an ongoing pattern of credit problems and an otherwise responsible borrower whose credit was affected by one particular life event. Maybe that person lost a job or experienced another disruption. A lower score by itself doesn’t necessarily tell you whether that person is capable of repaying a loan.
When it comes to the credit score, the number is less important than understanding what sits behind it.
The Asset Matters More Than Many Lenders Realize
Recreational assets themselves create another layer of complexity. Auto lending is relatively standardized. Boats and motor homes are far from standardized.
With a boat, for example, you’re not simply financing “a boat.” You have to understand the hull, the engine configuration and whether there is a trailer. A boat could have one engine or six. It might be trailered from one location to another or kept at a marina.
There are also many private-party transactions in recreational lending. Those can involve existing liens, titles, inspections, state-specific requirements or even Coast Guard documentation.
A consumer could walk into a local bank with excellent credit and still discover that the institution simply doesn’t have a loan program that fits the age of the boat, the dollar amount being financed or that particular type of collateral.
That’s why I often say the customer shouldn’t have to teach the lender about the boat or RV they’re trying to finance. The finance company should understand the asset, understand the documentation and know how to get the transaction closed.
Technology Should Remove Friction
Consumers today want technology and speed, but they don’t want to sacrifice expertise or personal service.
Someone applying for a recreational loan expects the process to be simple and fast. They don’t want to complete an unnecessarily complicated application, and once they apply, they want to understand what happens next.
Technology can dramatically improve that experience and reduce friction. But I don’t believe technology should eliminate the human factor altogether.
Boat and RV financing contains too many variables for a one-size-fits-all approach. A private-party boat purchase with an existing lien can be a very different experience from purchasing a new unit at a dealership.
I believe the future of recreational lending is combining intelligent technology with specialized human expertise.
Ultimately, consumers don’t care how sophisticated the technology behind the process is. They want to know if you can finance the boat or RV they want to buy, if you can offer them a competitive financing option, if the process is easy and if they can trust you to get the transaction closed.
After nearly a million applications, that may be the biggest lesson of all. Recreational lending isn’t about reducing a borrower or a transaction to a single number. It’s about understanding the whole picture: the borrower, the collateral and the transaction.
Technology can make that process faster and easier. But expertise is what allows lenders to understand the nuances behind each application and ultimately get the deal done.
President and Co-Founder, Southeast Financial
Rate does not apply to refinancing.
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