Boat Loans: Understanding Your Financing Options

If you're looking to purchase a boat, there are a variety of loan options available to you. Boat loans are a type of personal loan that can be used to finance the purchase of a new or used marine vessel. These loans can be secured or unsecured, with repayment terms of up to 20 years. When considering a boat loan, it's important to keep in mind the monthly payments as well as the additional costs of ownership such as registration, maintenance, repairs, gas, taxes, insurance, docking fees, and storage.

There are several lenders that offer boat loans, including banks, credit unions, online lenders, and marine dealerships. Each lender will have different requirements and application processes, so it's important to compare options to find the best fit for your needs. Additionally, pre-approval and pre-qualification can give you an idea of what lenders are willing to offer before you submit a full application.

Whether you're buying a new or used boat, or looking to refinance an existing boat loan, there are financing options available to make your dream of boat ownership a reality.

Where to get a boat loan

Boat loans are a type of personal loan, similar to auto loans. There are several options for where to get a boat loan, each with their own pros and cons. Here are some places to consider:

Banks

Banks often offer unsecured personal loans and secured recreational vehicle loans that can be used to purchase a boat. If you are already a customer of a particular bank, you may be able to get a higher loan amount or lower interest rates. Some banks that offer boat loans include:

• Truist (formerly SunTrust)
• US Bank
• Bank of the West
• Regions Bank

Credit Unions

Credit unions may offer both unsecured and secured loan options for boat purchases. Credit unions tend to have lower interest rates and fees than other lenders, but you usually need to be a member to apply for a loan. Some credit unions that offer boat loans include:

• Navy Federal Credit Union
• Patelco Credit Union

Online Lenders

Online lenders and financial technology companies often offer secured or unsecured loan options for boat loans. They typically have quick applications and loan processing times, but may not provide in-person customer service. Some online lenders that offer boat loans include:

• SoFi
• LightStream
• LendingPoint
• Southeast Financial
• Upgrade
• Universal Credit

Boat Dealerships

Boat dealerships often work with banks and credit unions to offer financing options for their customers. Some boat manufacturers and dealers may have special financing deals with attractive interest rates, but these may be limited to certain makes and models of boats. You may also be able to apply for a loan through a marine dealership that sells boats.

Marine Finance Companies

Marine finance companies specialise in boat loans and often offer secured loans similar to auto loans. The boat you purchase will serve as collateral for the loan. Some marine finance companies include:

• BoatUS
• Boatloan.com
• Trident Funding

Pros and cons of financing a boat

Pros of Financing a Boat

Financing a boat has several advantages:

• You can buy the boat now and start enjoying the boating lifestyle immediately, rather than waiting years to save up.
• It allows you to budget by ensuring you have savings left for a rainy day.
• It can improve your credit score if you repay the loan on time each month.
• With a multitude of lenders offering boat loans, you can shop around to find flexible terms that suit your needs.
• You can gain access to funds you need to buy your dream boat, which you otherwise might not be able to afford.

Cons of Financing a Boat

There are also some disadvantages to financing a boat:

• The overall purchase price will be higher as you will be paying interest on the loan.
• There is a risk of losing your boat if you default on a secured loan.
• There is more paperwork involved than if you were to buy a boat with cash.
• It may be difficult to get approved for a large loan amount.
• High interest rates could lead to you paying much more than you originally borrowed.
• Longer loan terms mean paying more interest over the life of the loan.

How to apply for a boat loan

Check your credit score

Lenders will check your credit score to determine your creditworthiness. A good-to-excellent score will help you secure a loan with lower interest rates and longer terms. If your score is not in the good-to-excellent range, you may want to consider an unsecured personal loan to finance your boat.

Calculate how much you need to borrow

Use a boat loan calculator to get an idea of how much your monthly payments will be. Play around with the loan term and interest rates to find a monthly payment that suits your budget. Remember that a short-term loan will result in higher monthly payments but less total interest, while a longer-term loan will be the opposite.

Gather the required documentation

To ensure a smooth loan process, you should have copies of important financial documents, such as tax returns, bank statements, brokerage account statements, and proof of residence. For secured boat loans, your lender may also require information about the boat, such as its value and condition.

Prequalify and compare lenders

Try to work with lenders that offer prequalification for a boat loan. Prequalification allows you to compare potential offers without a hard inquiry on your credit score. While it doesn't guarantee approval, it gives you an idea of the rates and terms you could receive.

Submit a full application

After choosing a lender, you'll typically finish the application process online. Be prepared to provide detailed information about the boat you're considering, including its purchase price, type, and age. You may also need to submit to a hard credit check and provide additional documentation.

Wait for approval

Depending on the lender, you should receive a final answer within a few hours or a few days. If you're taking out a secured loan, you may need to wait for a marine survey report, which assesses the boat's value.

Finalize the loan

Once your loan is approved, the lender will finalize the loan paperwork and disburse the funds. If you're taking out a secured loan, the funds may be sent directly to the seller or lienholder. With an unsecured loan, the funds are usually deposited into your bank account.

What is a boat loan?

A boat loan is a type of personal loan that borrowers can use to finance the purchase of a marine vessel. Boat loans are similar to auto loans and can be secured or unsecured. Unsecured loans do not require any collateral, while secured loans are backed by collateral. In the case of a boat loan, the boat itself would serve as collateral. If the borrower is unable to make the payments on their loan, the lender can take possession of the boat.

Boat loan terms are typically between 10 and 15 years, but borrowers may also find loan terms of just a couple of years or up to 20 years. Lenders charge interest on boat loans, and the rates vary based on several factors, including the borrower's credit score. For borrowers with excellent credit, interest rates typically start at around 7% to 8%.

Lenders may also require the borrower to pay a down payment, which typically ranges from 10% to 30% of the total purchase amount. In addition to the credit score, lenders will consider the borrower's income and debt-to-income ratio when evaluating a boat loan application.

Boat loans can be obtained from various lenders, including banks, credit unions, online lenders, and marine dealerships. The application process may vary depending on the lender, with some requiring in-person applications and others offering online application processes.

Before applying for a boat loan, it is important to consider the additional costs of owning a boat, such as registration, maintenance, repairs, gas, taxes, insurance, docking fees, and storage. These costs should be factored into the overall budget when considering a boat loan.

Alternatives to taking out a boat loan

If you're looking to buy a boat but don't want to take out a loan, there are several alternatives to consider. Here are some options:

Paying in Cash

Paying in cash is the cheapest option as you avoid interest charges and loan fees. However, ensure you have sufficient funds remaining for emergencies and other financial goals.

Renting a Boat

If you only plan to go boating occasionally, renting may be a more cost-effective option. This eliminates the need for storage, maintenance, and insurance costs associated with owning a boat.

Boat Clubs

Joining a boat club provides access to a fleet of boats for a one-time fee and ongoing dues. This can be a more affordable option than purchasing and maintaining your own vessel.

Peer-to-Peer Rentals

Similar to renting a house through Airbnb, you can temporarily rent a boat from peer-to-peer rental marketplaces like Boatsetter or GetMyBoat.

Personal Loans

Personal loans can be used for a variety of expenses, including boat purchases. These loans can be secured or unsecured, but it's important to consider the higher interest rates and origination fees that may apply.

Home Equity Loans or Lines of Credit

You can borrow against the equity in your home to obtain funds for a boat purchase. Home equity loans tend to have lower interest rates, but defaulting on payments could result in losing your home.

Frequently asked questions