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How to finance a boat


Buying a boat can be a fun investment, but it can also be expensive. Prices vary depending on the type of boat you are considering, but the average cost of a new boat is usually between $60,000 and $75,000. In addition to the cost of the boat itself, you also need to consider insurance, maintenance and fuel costs. If you are considering buying a boat, but need help financing it, there are several options available to you.

Taking out a boat loan can be an excellent way to finance the purchase of your boat without breaking the bank. There are several things to consider before choosing a boat lender, including loan terms, interest rates, and eligibility criteria. Your credit score will play a major role in determining what terms you qualify for.

What is a boat loan?

A boat loan is a type of personal installment loan offered by credit unions, banks, and online lenders. When you take out a boat loan, you start making fixed monthly payments until the loan is paid off. Monthly payments will include a fixed interest rate and any fees charged by the lender.

Lenders generally have the choice between several repayment methods. The term of the loan and the interest rate you qualify for depends on your credit score, debt-to-equity ratio, income, loan size, and whether you choose to take out a secured or unsecured loan.

Types of boat loan

If you want to finance your boat with a loan, you have several options.

Secured loans

Secured loans require you to provide collateral to ensure repayment of the loan. For a boat loan, you would place the boat as collateral, which means the lender could repossess the boat if you stop making payments or fail to repay the loan.

The advantage of secured loans is that they usually come with lower interest rates and higher loan limits because the lender poses less risk. However, you risk losing your boat if you are unable to make the payments.

Unsecured Loans

Unsecured loans do not require any collateral, which means you do not risk losing any physical assets when you apply for these loans. However, unsecured loans have higher interest rates and lower borrowing limits, especially if you don’t have good credit. For borrowers with good to excellent credit, unsecured loans are a great option.

Where to get a boat loan

If you decide to take out a loan to finance your boat, you have several options. A variety of lenders offer boat loans, including traditional brick-and-mortar banks, credit unions, and online lenders. Before choosing an individual lender, it is important to compare the best boat lenders and find the one that will best suit your needs.

Traditional banks

Many traditional banks offer loans. If you have a relationship with a bank that offers personal loans for boat financing, it may be a good idea to consider taking out a loan from that institution. It’s often easier to get the best rates if you’ve worked with a bank in the past, and some banks offer loyalty discounts to customers who have other accounts with them. Working with a bank may also be your best option if you prefer in-person service.

credit unions

Credit unions, like banks, usually include benefits for pre-existing customers. Credit unions are usually local institutions that must be members to access their products. If you are a member of a credit union or are considering joining one, you may benefit from lower interest rates and more flexible credit requirements.

Online lenders

Online lenders allow borrowers to apply for and receive a loan completely online. These lenders tend to have faster approval and funding processes than traditional institutions. If you prefer an entirely online experience or need your funds quickly, finding an online lender might be your best option.

What to consider before getting a boat loan

Before applying for a boat loan, there are several things to consider. Once you have chosen a boat and determined the amount of money you need to borrow, you need to check your credit score. Knowing your credit score will give you a better idea of ​​the rates and loan amounts you may qualify for from various lenders. The lowest advertised interest rate is never guaranteed. Make sure you have a good idea of ​​what your interest rate will be before signing with a lender, taking into account any fees charged by the lender.

Lenders offer a variety of loan amount ranges and loan repayment ranges. That’s why it’s so important to know how much you need to borrow before researching lenders. Be sure to factor things like maintenance costs and insurance into the total cost of your boat before deciding how much you need to borrow. Generally, larger loans have longer repayment terms, but the exact terms depend on the lender you choose.

It is essential that you do your research and read the fine print before signing up for a loan.

How to apply for a boat loan

If you decide that taking out a boat loan is the right decision, you can follow these steps:

  1. Calculate how much you need to borrow. Owning a boat costs more than the price of the boat itself. You should factor in boating insurance, maintenance costs, and other potential costs when calculating your expenses.
  2. Check your credit score. Knowing your credit score and having a good understanding of your financial situation will help you determine the loan terms you will qualify for with individual lenders.
  3. Choose your type of loan. Boat loans can be secured or unsecured. Secured loans require collateral. In this case, the warranty would be the boat you are buying. If you don’t want to run the risk of losing your boat, it may be a good idea to take out a loan without collateral.
  4. Research lenders. There are a variety of lenders to choose from. Be sure to review the terms and pricing offered by each, as well as any fees charged or additional perks such as auto-pay discounts and 7-day customer service.
  5. Choose a lender and apply. Once you have decided which lender you want to work with, you can apply online or in person if the institution has branches. If you’re deciding between lenders and want to see exactly what the terms will be, many lenders allow you to prequalify without hurting your credit score. This allows you to see exactly what you would qualify for with that lender.
  6. Prepare the necessary documents. During the application process, you will need to provide supporting documents such as pay stubs, W2s, proof of residency, driver’s license, and other documents that show your financial situation.

Alternatives to boat credit

If you don’t want to buy a boat with a personal loan, you can consider other options.

Pay in cash

If you have enough money saved up and are able to afford it, paying cash for your boat might be a smart move. Although taking out a loan allows you to build up credit, paying in cash allows you to avoid additional fees and interest. It also means that your debt ratio and credit score will remain unchanged since the purchase.

Rent a boat

Buying a boat is a commitment that requires regular maintenance, insurance and other expenses. If you want the experience of driving a boat without a long-term commitment and without additional costs, you can consider renting a boat. This would allow you to gain the experience without making any commitment.

Marine financing

Financing through the dealer you buy the boat from is probably the most convenient financing option. Working with the dealer’s finance office can reduce the time spent looking for loans. Sometimes dealers offer special perks like rebates and manufacturer offers. However, financing through a dealership tends to be more expensive, with higher interest rates and longer repayment terms that require you to pay more interest.

At the end of the line

If you want to buy a boat and are financially ready to commit, there are several ways to finance it. However, unless you can pay cash, taking out a boat loan is probably your best bet. Be sure to research the best boat lenders carefully and get quotes from a few different lenders before settling on one. It’s also important to know exactly how much you’ll be paying each month, so try using our boat loan calculator before applying for your loan.