Best Boat Loan Interest Rates: Where To Find Them

There are a variety of lenders for boat loans, including banks, credit unions, online lenders, and marine dealers. The best interest rates for boat loans are currently around 6.74% APR for those with excellent credit. However, several factors affect the interest rate a borrower will pay, such as their credit score, the loan amount, the age of the boat, and the loan term. It is recommended to shop around and compare offers from different lenders to get the lowest rate and best loan terms.

Unsecured vs. secured boat loans

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

Secured Boat Loans

A secured boat loan is a type of loan that is backed by collateral in the form of a boat or other watercraft. The lender uses the boat as security for the loan, which means that if you default on the loan, they can repossess the boat to recoup their losses. Secured boat loans often come with lower interest rates than unsecured loans because the lender has the added security of the collateral. However, it's important to note that if you default on the loan and the lender repossesses the boat, you could lose ownership of it.

The collateral for a secured boat loan can include the boat itself, as well as any other assets that the borrower is willing to pledge as security for the loan, such as a car or home. In the event that the borrower is unable to repay the loan, the lender has the right to seize the collateral and sell it to recover their losses. The lender will typically perform an appraisal of the boat and any additional assets offered as collateral to determine their value.

Secured boat loans usually require a down payment of 10% to 20% of the total loan amount, and the repayment term can be as long as 20 years. Secured loans often come with longer repayment terms and more flexible repayment options, making the monthly payments more affordable. They also offer access to larger loan amounts because the lender has the security of the boat as collateral. It is also easier to get approved for a secured loan, even with a lower credit score or limited credit history.

However, there are some disadvantages to consider with secured boat loans. The biggest risk is that if the borrower is unable to repay the loan, the lender can seize the collateral. The application process can also be time-consuming and require more paperwork due to the need for collateral evaluation and verification. Longer repayment terms can result in paying more interest over time, and there may be limited use of collateral as the borrower cannot sell or use the pledged assets for any other purpose until the loan is repaid. Secured loans may also come with higher fees, such as appraisal fees, insurance fees, or closing costs.

Unsecured Boat Loans

An unsecured boat loan, on the other hand, does not require collateral such as a boat or other assets to secure the loan. Instead, the lender evaluates the borrower's creditworthiness and income to determine their ability to repay the loan. Unsecured boat loans are typically offered at higher interest rates than secured boat loans because the lender is taking on more risk by not requiring collateral. However, unsecured loans can be a good option for borrowers who do not want to put up collateral or who do not have valuable assets to use as collateral.

One of the biggest advantages of an unsecured boat loan is that it does not require any collateral, which means borrowers do not have to put their boat or any other asset at risk. The application process is usually faster and requires less paperwork, making it easier and quicker to obtain the loan. There is also no risk of losing collateral if the borrower is unable to make their loan payments. Unsecured loans can be used for a variety of purposes, including financing the purchase of a new or used boat, as well as other related expenses such as repairs or upgrades. There is no need for an appraisal of the collateral, which can save borrowers time and money.

However, there are also some disadvantages to consider with unsecured boat loans. Unsecured loans typically come with higher interest rates and stricter qualification requirements, such as a higher credit score or income level. The loan amounts may be smaller, and the repayment terms are usually shorter, resulting in higher monthly payments. There is also a potential risk of damaging the borrower's credit score if they are unable to make payments on an unsecured loan.

Key Differences Between Secured and Unsecured Boat Loans

The main difference between secured and unsecured boat loans is that secured loans require collateral, such as a boat or other assets, while unsecured loans do not. Secured loans typically have lower interest rates and offer larger loan amounts, while unsecured loans have higher interest rates because the lender is taking on more risk. Secured loans often come with longer repayment terms, resulting in lower monthly payments, while unsecured loans have shorter repayment terms and higher monthly payments. The application process for secured loans is usually more extensive and requires more paperwork due to the need for collateral evaluation and verification.

Ultimately, the decision to choose between a secured or unsecured boat loan will depend on the borrower's financial situation and preferences. Borrowers who have valuable assets to use as collateral, need a larger loan amount, and are comfortable with a longer repayment term may prefer a secured loan. On the other hand, borrowers who do not want to put up collateral, do not have valuable assets to use as collateral, or need a smaller loan amount may prefer an unsecured loan. It's important for borrowers to shop around and compare rates and terms from multiple lenders to find the best loan for their needs.

Loan term lengths

When it comes to loan term lengths, there are a few things to consider. Firstly, it's important to note that boat loan terms can vary depending on the lender and the type of loan you choose. Secured boat loans typically offer longer repayment terms than unsecured boat loans. Secured boat loans are backed by collateral, usually the boat itself, which means that the lender can repossess the boat if you default on the loan. Unsecured boat loans, on the other hand, are not backed by collateral, and thus tend to have shorter repayment terms, usually no more than five to seven years.

The length of your boat loan will also depend on the size of the loan and the age of the boat. Larger loan amounts may qualify for longer repayment terms, while older boats may have shorter loan terms as they are considered a higher risk for lenders. Additionally, the interest rate and down payment amount can also impact the length of your loan. A higher interest rate may result in a longer repayment term, while a larger down payment can help shorten the loan term.

When considering a boat loan, it's important to shop around and compare offers from multiple lenders to find the best terms for your needs. It's also crucial to keep in mind the total cost of owning a boat, which includes ongoing expenses such as maintenance, storage, insurance, and fuel costs. By considering all these factors, you can make an informed decision about the length of your boat loan and choose an option that fits your financial needs and budget.

Interest rates

Unsecured vs Secured Loans

Unsecured loans don't require collateral, so you won't risk losing your boat if you default. However, interest rates for unsecured loans are typically higher and terms shorter. On the other hand, secured loans use the boat as collateral, which means lower interest rates and longer repayment terms, but you could lose your boat if you default.

Unsecured boat loans will have an annual percentage rate (APR) ranging from 6% to 36%. As of December 2024, the average unsecured interest rates based on your credit bracket are as follows:

• Excellent Credit: 6.49% - 8.49%
• Good Credit: 8.49% - 13.49%
• Fair Credit: 13.49% - 24.99%
• Poor Credit: 24.99% - 35.99%

Secured loans may offer lower APRs, with many lenders providing single-digit rates. Some of the lowest interest rates for secured boat loans as of September 2024 are:

• Sterling Associates: APR as low as 6.25%
• LightStream: 6.99% with AutoPay
• Boatloan.com: 6.99% with AutoPay
• Southeast Financial: As low as 6.49%
• Boatzon: Competitive rates

Other Factors Affecting Interest Rates

In addition to the type of loan and your credit score, other factors can influence the interest rate on a boat loan. These include:

• The purchase price of the boat
• Origination fees and other additional fees
• The length of the loan
• Market conditions and inflation
• Actions taken by the Federal Reserve

Loan approval factors

Lenders will consider a variety of factors when deciding whether to approve your boat loan application. Here are some of the key factors that will influence their decision:

• Credit Score: A strong credit score is crucial for obtaining a boat loan with favourable terms and interest rates. Most lenders require a minimum credit score of 620 to 690, but some lenders may offer loans to borrowers with lower scores.
• Down Payment: Lenders often expect a down payment of 10% to 20% of the boat's purchase price. Having cash on hand for a down payment can improve your chances of loan approval.
• Income: Lenders will assess your income to ensure you have the financial capacity to repay the loan. They may set a minimum income requirement, which varies depending on the lender.
• Boat Age and Value: Lenders may have restrictions on the age and value of the boat they are willing to finance. Older boats or boats with a lower value may be more challenging to secure a loan for.
• Loan Amount and Term: The loan amount and repayment term you are seeking will also be considered. Lenders will evaluate whether your requested loan amount and repayment term align with their offerings and your financial situation.
• Collateral: Secured boat loans use the boat as collateral, while unsecured boat loans do not require collateral. Secured loans may offer lower interest rates and longer repayment terms but carry the risk of losing your boat if you default. Unsecured loans may have higher interest rates and shorter terms but do not put your boat at risk.
• Financial History and Stability: In addition to your credit score, lenders will review your financial history and stability. They will assess your credit history, existing debt, and employment stability to determine your ability to repay the loan.
• Relationship with the Lender: If you are applying for a loan from a bank or credit union where you are an existing customer, your relationship with the institution may influence the approval decision. Loyal customers may receive preferential treatment or discounts.
• Additional Requirements: Lenders may have specific eligibility requirements, such as citizenship, age, or other factors. Make sure you meet the basic qualifications before applying.

It is important to shop around and compare multiple lenders before submitting your loan application. Prequalification can also be a useful step, as it allows you to check your predicted interest rates and approval odds without negatively impacting your credit score.

Loan alternatives

If you are looking for alternatives to taking out a boat loan, there are several options to consider.

One option is to simply save up for the purchase. This can be a good option if you are able to negotiate a cheaper price by paying with cash, and it will help you avoid paying interest on a loan. Another option is to join a boat club, which typically involves paying a one-time fee and ongoing monthly or annual dues in exchange for access to a fleet of boats. You can also consider peer-to-peer rentals, where you can temporarily rent a boat through a platform such as Boatsetter or GetMyBoat.

If you are looking for a more affordable way to own a boat, you might consider renting or leasing a boat. This can be a more cost-effective option, especially if you are only an occasional boater. However, it's important to note that with leasing, you will be giving up your captain's hat.

Another alternative is to pay cash for the boat, which can be the cheapest option as you won't have to pay interest charges or loan fees. However, it's important to ensure that you have enough cash left over for an emergency fund and other financial goals.

Additionally, boat dealers may offer onsite financing options, which can be convenient for buying and financing the boat in one place. However, it's important to compare these financing terms with other lenders to ensure you're getting the best deal.

Frequently asked questions