A person who has bought a boat by taking a loan may find it difficult to keep up with the loan payments. He may then want to sell the boat. What are his options?
Selling a boat when one still has a loan can be a little complicated. And if one is trying to sell it privately without informing the lender, he could land in trouble. After all, the boat loan is a secured loan with the boat as the collateral. So the lender has a lien on the boat and his approval is required before selling it. Here are the different ways of going about such a situation:
If the selling price of the boat is higher than the unpaid boat loan amount, the boat owner can ask the prospective buyer for the money, pay the lender what is due to him, get back the title to the boat and sign it over to the new buyer. But the buyer should be able to make a down payment which will fulfill the seller’s obligation to the lender. If that does not happen and the boat is handed over to the buyer without the title deed, the seller would be responsible at least partially for any untoward incident like an accident.
The buyer can be asked to take over the loan but this would require an approval from the lender. So if there is a chance that such a request would be declined, it would be better to ask the buyer to arrange for the money. This can be used to repay the loan.
The lender may want the boat owner to first open an escrow by which the money from the sale of the boat will first go to the lender’s account. Any money over and above what is due to him will go to the seller of the boat.