Boat Loan Rates: Understanding The Best Deals

The interest rate on a boat loan depends on several factors, including the loan amount, the length of the loan, the borrower's credit score and history, and the age of the boat. While it is possible to obtain a boat loan with a bad credit score, those with higher credit scores will typically get better interest rates. According to Boats Group's Year End Market Index, the average cost of a yacht in 2023 was between $53,000 and $4.7 million, so financing a yacht may be out of reach for many. However, some lenders do offer competitive rates starting at around 6%. For example, LendingTree, Boatloan.com, Southeast Financial, and LightStream all offer rates starting at 6.99%. Additionally, Upgrade offers rates starting at 9.99%, while Upstart, Achieve, Prosper, and SoFi offer rates starting at 8.99%. These rates are subject to change and were last updated in December 2024.

The impact of credit score on boat loan rates

Credit score has a significant impact on boat loan rates. A higher credit score generally results in lower interest rates, while a lower credit score can lead to higher interest rates. Lenders consider individuals with high credit scores to be less risky and are therefore more likely to offer favourable terms.

Those with strong credit may find boat loan rates as low as 6.24% to 6.74% APR. These rates are typically available to individuals with excellent credit scores, which is usually considered to be above 750. However, it's important to note that the boat loan interest rate also depends on other factors, such as the loan amount, length of the loan, and the borrower's financial information, including income and credit history.

For individuals with fair or good credit, which is typically considered to be in the range of 675 to 749, boat loan rates may start at around 6.99% to 7.49% APR. Lenders offering these rates include LendingTree, LightStream, and Boatloan.com. It's worth noting that these lenders may have additional requirements, such as a minimum income or a stable financial history.

For borrowers with bad credit, defined as a score between 300 and 674, there are still options available, but the interest rates tend to be higher. Southeast Financial, for example, offers boat loans to individuals with bad credit, but the interest rates are not disclosed. Additionally, borrowers with bad credit may be required to make a down payment of 10% to 20% of the boat's cost.

When considering a boat loan, it's important to shop around and compare offers from multiple lenders. This is because interest rates can vary significantly, and finding the lowest rate can result in significant savings over the life of the loan. It's also worth noting that some lenders may offer special financing deals or have relationships with manufacturers that can provide additional benefits.

How to get a good boat loan rate with bad credit

Boat loans are a type of personal loan used to finance the purchase of a new or used marine vessel. Lenders offer boat loans to people with credit scores ranging from fair to excellent, with a typical minimum credit score requirement of 680. However, it is still possible to get a boat loan with bad credit. Here are some tips to help you secure a good boat loan rate even with bad credit:

Check Your Credit Score and Improve it if Possible

Before applying for a boat loan, it is essential to check your credit score. Your credit score will determine the interest rates and terms of your loan. If you have bad credit, consider improving your score before applying. This may involve paying off existing debts, disputing any inaccuracies on your credit report, or adding positive information to your credit history. Even a small improvement in your credit score can make a significant difference in the interest rates you qualify for.

Compare Interest Rates from Multiple Lenders

Don't settle for the first loan offer you receive. Shop around and compare interest rates from multiple lenders, including banks, credit unions, and online lenders. By gathering several quotes, you can identify which lenders are more willing to work with borrowers who have bad credit. This process will also help you find the most competitive interest rates and save money in the long run.

Consider a Co-Applicant or Co-Signer

If you have a co-applicant or co-signer with a strong credit score, consider applying for the boat loan together. This can significantly improve your chances of qualifying for a better interest rate. The co-applicant or co-signer will share the responsibility for the loan, so ensure they understand the financial commitment and potential risks involved.

Make a Larger Down Payment

When you have bad credit, lenders may be more willing to offer a lower interest rate if you can make a larger down payment. Typically, down payments for boat loans range from 10% to 20% of the total purchase price. By making a larger down payment, you reduce the lender's risk and demonstrate your financial commitment to the loan.

Opt for a Secured Loan

Secured loans are backed by collateral, such as the boat itself or another valuable asset. Offering collateral can make you a more attractive borrower, even with bad credit. Lenders typically offer lower interest rates on secured loans because they have the assurance that they can repossess the collateral if you default on the loan.

Choose a Less Expensive Boat

If you're flexible with your boat choice, consider opting for a less expensive model. A lower purchase price can make it easier to secure a loan and manage the interest rates. Used boats, in particular, tend to be more affordable and may increase your chances of approval.

Work on Your Debt-to-Income Ratio

Lenders will consider not just your credit score but also your income and debt-to-income ratio (DTI). A high income and a low DTI are considered lower risk and can help you qualify for better loan terms and interest rates. Before applying for a boat loan, work on reducing your existing debts and improving your overall financial situation.

Remember, while it is possible to obtain a good boat loan rate with bad credit, you may still face higher interest rates compared to borrowers with excellent credit. Be sure to carefully review the loan terms and conditions, considering not just the interest rate but also any additional fees, down payment requirements, and repayment timelines.

Secured vs unsecured boat loans

Secured vs. Unsecured Boat Loans

When it comes to boat loans, there are two types to consider: secured and unsecured. Both have their advantages and disadvantages, and it's important to understand the differences between them before deciding which one is right for you.

Secured Boat Loans

Secured boat loans require collateral, such as the boat itself or another valuable asset like a home or car. This means that if you default on the loan, the lender can repossess the collateral to recoup their losses. Because the lender has this added security, secured boat loans often come with lower interest rates and more flexible repayment options than unsecured loans. They also typically offer access to larger loan amounts and longer repayment terms, which can make the monthly payments more affordable. However, there is a risk of losing your collateral if you are unable to repay the loan. The application process for secured loans also tends to be more time-consuming due to the need for collateral evaluation and verification.

Unsecured Boat Loans

Unsecured boat loans, on the other hand, do not require collateral. Lenders consider these loans riskier, so they usually charge higher interest rates. However, unsecured loans offer more flexibility in how you spend the money, and there is no risk of losing your collateral if you cannot make the loan payments. The application process for unsecured loans is generally faster and requires less paperwork. Unsecured loans are a good option for borrowers who do not have valuable assets to use as collateral or who want to avoid putting their assets at risk. However, these loans may come with stricter qualification requirements, smaller loan amounts, and shorter repayment terms.

Choosing the Right Loan

The decision between a secured or unsecured boat loan depends on your financial situation and preferences. If you have valuable assets to use as collateral, need a larger loan amount, and are comfortable with a longer repayment term, a secured loan may be the best option. On the other hand, if you do not want to put up collateral, do not have valuable assets, and only need a smaller loan amount, an unsecured loan may be more suitable. It's important to carefully consider the risks and benefits of any loan before making a decision.

How to get pre-approved for a boat loan

Getting pre-approved for a boat loan is a crucial first step when shopping for a boat. It will help you understand how much you can spend and find the best deal. Here is a step-by-step guide on how to get pre-approved for a boat loan:

Choose the Type of Vessel and Estimate the Cost:

Before applying for pre-approval, decide on the type of boat you want and estimate its cost. This will help you determine the loan amount you need.

Check Your Budget:

Use a boat loan calculator to ensure that you can afford the monthly payments. Consider factors such as the loan amount, interest rate, and loan term. The loan amount is typically the cost of the boat minus a down payment of 10% to 20%. Interest rates for boat loans currently start at around 6.49% as of October 2024 but can be higher for those with bad credit. Loan terms for boats typically range from 10 to 20 years, or even up to 252 months with certain lenders.

Gather the Required Documentation:

Lenders will require various financial information and documents to assess your eligibility for a boat loan. Standard items include proof of identity (e.g., Social Security number, driver's license), current debts (e.g., mortgage, car loans, student loans), proof of income (e.g., W-2 form, tax returns), proof of employment (e.g., pay stubs), and other financial assets (e.g., savings accounts, stocks, real estate investments).

Apply for Pre-Approval:

You can apply for a pre-approved boat loan directly with a lender or through an online platform. You will need to provide detailed information about your identity, employment, and income. Be prepared to submit documents such as your driver's license, tax returns, and W-2 forms. The lender will perform a hard credit pull, which can temporarily lower your credit score by a few points. If you are approved, you will receive a pre-approval letter, outlining the interest rates, loan amount, and repayment terms you can expect.

Shop for Your Boat:

With your pre-approval in hand, you can now start shopping for your dream boat with confidence. You can take your pre-approval to any participating dealership or use it to finance a used boat. Remember, your pre-approval is typically valid for a limited period, such as 60 days, so be sure to finalise your purchase within that timeframe.

By following these steps, you will be well on your way to securing a boat loan and making an informed decision about your purchase.

How to compare boat loan rates

When comparing boat loan rates, it's important to consider a few key factors to ensure you're getting the best deal. Here are some tips on how to compare boat loan rates:

• Check your credit score: Your credit score will have a significant impact on the interest rate you'll be offered. Generally, borrowers with higher credit scores will qualify for lower interest rates. It's a good idea to review your credit report and address any discrepancies before applying for a loan.
• Shop around: Don't settle for the first loan offer you receive. Compare rates and terms from multiple lenders, including banks, credit unions, and marine dealers. By shopping around, you can find the most competitive rates and save money on interest payments.
• Understand the loan term: The length of the loan term will affect your monthly payments and the total cost of the loan. Longer loan terms result in lower monthly payments but higher overall interest costs. Shorter loan terms have higher monthly payments but lower total interest costs. Choose a loan term that fits your budget and financial goals.
• Consider the loan-to-value (LTV) ratio: Lenders typically require an LTV ratio of 85% or lower, which means you can finance up to 85% of the boat's value. A higher down payment can help you maintain a healthy LTV ratio and may also lower your interest rate.
• Look beyond the advertised rate: The advertised rate may not be the rate you actually get. Lenders often offer their best rates to borrowers with excellent credit scores and strong financial profiles. Your actual interest rate may vary based on your credit score, debt-to-income ratio, and other factors.
• Research the lender: Before committing to a loan, research the lender's reputation and business practices. Check reviews, compare their rates with other lenders, and understand their requirements and fees. A good lender should be transparent about their rates, terms, and conditions.
• Use a boat loan calculator: Utilize online tools such as boat loan calculators to estimate your monthly payments and the total cost of the loan. This will help you determine if the loan fits within your budget and allow you to make an informed decision.
• Compare APRs: In addition to interest rates, compare the Annual Percentage Rates (APR) offered by different lenders. APR includes not only the interest rate but also any additional costs and fees associated with the loan. Comparing APRs will give you a more comprehensive understanding of the total cost of the loan.

Frequently asked questions