What Is a Boat Short Sale?

A short sale of your boat may save your credit score.

If you use financing to obtain the money to buy your boat, then you need to pay the amount back to the lender over time. If, at any point, you can't make your regular payments, the lender may take possession of your boat. This action affects your credit score adversely. A boat short sale provides you with a way out.

Features

A short sale occurs if you and your lender reach an agreement to sell the boat for less than the deficiency balance, which is amount you still owe on the loan. The deficiency balance includes the loan principal, interest, penalties and fees. The lender will get the money from the sale of the boat and you will walk away with less damage to your credit score than if you were to let the lender take possession of the boat.

Liability After Short Sale

In some cases, the lender allows you to walk away after a short sale without having to pay anything. In other cases, you need to sign a contract with the lender to agree to pay the deficiency balance. The lender's decision on this matter depends on your case, but the new owner is never liable for the deficiency balance. If the lender wants to claim the deficiency balance legally, it will file a lawsuit.

Credit Score

If the lender were to take possession of your boat, it would report the action to credit reporting agencies. This would hurt your credit score badly and affect your chances of getting loans in the future. With a short sale, the lender will still report it to the credit reporting agencies, but it will have less impact on your credit score. In some cases, a short sale decreases the credit score slightly. In others, it makes no impact at all.

Process

If you want to do a short sale of your boat, you need to contact your lender as soon as you know that you will not be able to make your regular payments. The lender may have a deadline, after which it will take possession of the boat. You may need to provide financial documents to verify your situation. The lender may need to complete a financial analysis before approving you for a boat short sale.

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