Boat Loan Interest Rates: Is 13% Good Or Bad?

A credit score of 13 is considered to be a very poor rating. It is highly unlikely that a person with this credit score would be approved for a boat loan, or any other type of loan. To be approved for a boat loan, a person would typically need a credit score of at least 575, and even then, they would be subject to very high interest rates.

How does a boat loan work?

Types of Boat Loans

Boat loans can be secured or unsecured. Unsecured loans do not require any collateral, while secured loans are backed by collateral. In the case of a secured boat loan, the boat would serve as collateral. This means that if you default on the loan, the lender can take the boat as a form of repayment. With unsecured loans, the lender could take the borrower to court if they violate the terms of repayment and default on the loan balance.

Where to Get a Boat Loan

You can apply for a boat loan with various lenders, including banks, credit unions, online lenders, and marine dealerships. If you plan to buy from a marine dealership, it may offer dealer financing.

Boat Loan Terms

Boat loan terms are typically 10 to 15 years, but borrowers may also find loan terms of just a couple of years or longer than 15 years. Secured boat loans can reach up to 15 years, while unsecured options typically range between two to five years. The longer the loan term, the smaller the monthly payments will be, but the more you'll pay in total interest.

Down Payment

A lender may require you to pay a down payment, which tends to range from 10% to 30% of the total purchase amount. Some lenders offer 0%-down loans, but making a down payment can help prevent a situation where you owe more on your boat loan than the boat is worth. It may also lower your monthly payment and reduce the total amount of interest you pay.

Interest Rate

Lenders charge interest on boat loans, and the rates vary based on several factors, including your credit score and financial history. The stronger your credit, the more likely you are to be offered competitive rates. Interest rates for borrowers with excellent credit start around 6.74% to 7.87%.

Other Costs

When calculating the entire cost of financing a boat, you'll need to consider regular maintenance costs and potential storage fees if you plan to store your boat at a marina. Boat owners also have to pay for registration, repairs, gas, taxes, boat insurance, docking fees, and storage.

What are the costs associated with boat ownership?

Owning a boat comes with a variety of costs, some of which are obvious and others that may come as a surprise. Here is a detailed breakdown of the costs associated with boat ownership:

Upfront Costs

The upfront costs of buying a boat can vary widely depending on the type, make, model, and age of the boat. The average cost of a new boat typically ranges from $40,000 to $75,000, but it can go as low as $9,500 for an older model. If you're buying a boat that needs to be transported and stored, you may need to factor in the cost of a trailer, which can add to the purchase price.

Annual Maintenance & Repairs

Annual maintenance costs for a boat depend on its size, type, and usage. On average, maintenance costs about $500 to $2,000 or more per year. Smaller boats may require less maintenance, and owners can often perform basic maintenance themselves. However, for larger or more complex boats, maintenance and repair costs can be significantly higher, especially if replacement parts are needed.

Storage Fees

Storing a boat when it's not in use can also be expensive. Indoor rack storage costs about $50 per foot of boat length, while outside storage is cheaper at around $10-$15 per foot. Marina storage fees can range from $1,000 to over $5,000 per season, depending on the region and the amenities offered.

Fuel Costs

Fuel costs for boats can be significant, especially for larger vessels. Smaller boats may use regular or premium gasoline, while larger boats may require diesel fuel, which is more expensive. A single five-hour trip in a motorboat can cost over $300 in fuel.

Insurance

Boat insurance is another necessary expense, with premiums depending on the boat's size, type, and location. Insurance typically costs around 1-3% of the boat's value. For example, insuring a $20,000 boat might cost about $300 per year.

Taxes, Registrations, and Certifications

Some states charge boat taxes, which must be paid annually, and there may also be a one-time sales tax when purchasing a boat. Depending on the state, you may need to register your boat and renew the registration annually. Additionally, certain states require safety certifications to operate a boat, which can add to the overall cost of ownership.

Accessories and Safety Equipment

Safety equipment, such as life jackets, distress signals, fire extinguishers, and radios, are essential but can add to the overall cost of boat ownership. Other accessories like stereos, lighting, and watersports equipment can also increase the cost.

Loan Interest and Down Payment

If you're taking out a boat loan, you'll need to consider the interest rate on the loan, which can vary based on your credit score and other factors. A down payment is typically required, ranging from 10% to 30% of the total purchase amount.

Overall, the costs of boat ownership go beyond the initial purchase price, and it's important for prospective boat owners to carefully consider and plan for these additional expenses.

What is a good interest rate for a boat loan?

A good interest rate for a boat loan is one that is less than the average personal loan rate of 12%.

Interest rates for boat loans vary based on several factors, including the borrower's credit score, the loan amount, the age of the boat, and the loan term. Generally, the best interest rates for boat loans start around 6.74% for those with excellent credit.

Borrowers with strong credit may find boat loan rates as low as 6.74% APR, while many boat loan interest rates start at 7%. A credit score of 680 or higher is typically required for a boat loan, though some lenders will work with borrowers who have lower credit scores.

It's important to note that used boat loans typically have higher interest rates than new boat loans. Additionally, unsecured boat loans tend to have higher interest rates than secured boat loans, as they are not backed by collateral.

When considering a boat loan, it's essential to compare rates from multiple lenders and to ensure that you understand the terms and conditions of the loan.

How do I get the best boat loan rate?

A boat loan is a type of personal loan used to finance the purchase of a new or used marine vessel. The best boat loan rates are typically reserved for those with good to excellent credit scores.

Shop Around for Lenders

Compare interest rates, loan terms, and eligibility requirements from multiple lenders, including banks, credit unions, and online lenders. Some lenders may offer more competitive rates or have lower credit score requirements. By shopping around, you can increase your chances of finding the best rate for your situation.

Improve Your Credit Score

Lenders consider your credit score when determining your interest rate. Generally, a higher credit score will result in a lower interest rate. If your credit score is below the minimum requirement, consider taking steps to improve it before applying for a boat loan. This may include paying off debts, disputing errors on your credit report, or using a credit-building credit card.

Choose a Secured Loan

Secured boat loans use the boat itself as collateral. These loans often come with lower interest rates and more flexible repayment terms than unsecured loans. If you default on the loan, the lender can repossess the boat, so this option may not be suitable for everyone.

Make a Larger Down Payment

A larger down payment can help you get a better interest rate on your boat loan. Lenders may see a larger down payment as a sign of financial stability and may be more willing to offer favourable terms. Additionally, a larger down payment can reduce the amount you need to borrow, which can save you money in interest over time.

Consider a Co-Borrower or Co-Signer

Applying for a boat loan with a co-borrower or co-signer can improve your chances of qualifying for a better rate. A co-borrower is someone who will share ownership of the boat and be equally responsible for loan repayments. On the other hand, a co-signer is someone who agrees to take responsibility for the loan if you fail to make payments but does not have ownership rights to the boat.

Prequalify for a Loan

Many lenders offer prequalification, which allows you to see the terms you may be eligible for without impacting your credit score. Prequalification can give you an idea of the interest rates and loan amounts you can expect, helping you compare lenders and choose the best option.

Consider Refinancing

If you already have a boat loan and are looking to lower your interest rate, consider refinancing with a different lender. Shop around for lenders who can offer you a lower interest rate or more favourable terms. Keep in mind that refinancing may come with its own set of fees and charges, so be sure to factor those into your decision.

By following these tips and comparing multiple lenders, you can increase your chances of getting the best boat loan rate for your situation.

What are the pros and cons of getting a boat loan?

A boat loan can be a great option for those who want to buy a boat but cannot pay for it upfront. Here are some pros and cons to help you decide if getting a boat loan is the right choice for you:

Pros:

• Access to funds: A boat loan can give you access to the funds needed to buy your dream boat, which you may not be able to afford to pay for out of pocket.
• Flexibility: With a multitude of lenders offering boat loans, you can shop around to find flexible terms that suit your needs.
• Breaks up the cost: A boat loan can help break down the total cost of a boat into more manageable monthly payments.
• Low-interest rates: If you have a good credit score, you may be able to secure a low-interest rate on your boat loan, which can make the overall cost of the loan more affordable.
• Long repayment terms: Boat loans typically have repayment terms ranging from 2 to 20 years, allowing you to choose a longer term with lower monthly payments if needed.

Cons:

• Risk of losing collateral: If you take out a secured boat loan and are unable to make the payments, the lender may seize your boat or other collateral.
• High-interest rates: Unsecured boat loans tend to have higher interest rates, and borrowers with lower credit scores may have to pay higher rates, increasing the overall cost of the loan.
• Depreciation: Boats depreciate over time, and if you sell your boat, you may owe more to your lender than what the boat is worth.
• Difficult to get approved: It may be challenging to get approved for a boat loan, especially for larger amounts, as lenders have different credit score requirements and eligibility criteria.
• Longer loan terms mean more interest: While longer repayment terms result in lower monthly payments, you will end up paying more in interest over the life of the loan.

Frequently asked questions