If you want to buy a boat, there are loans available to finance your purchase
What Is a Boat Loan?
Boat loans are a type of personal loan for borrowers who want to purchase a boat. These loans are similar to auto loans.
Several different types of lenders offer boat loans. Some lenders offer boat-specific loans, but many offer personal loans that can be used for most purposes, including the purchase of a boat.
Key Takeaways
- A boat loan is a type of personal loan that borrowers can use for the purchase of a marine vessel.
- Borrowers can explore boat loan options at banks, credit unions, online lenders, and marine lenders.
- A boat loan can break the total cost into more manageable monthly payments, but potentially high interest rates could increase the overall cost of the loan.
How a Boat Loan Works
Boat loans are installment loans, which means you will repay the amount borrowed in monthly amounts with interest. Typical considerations include:
- The amount you can borrow: The total amount that you borrow will depend on the boat you want to purchase and your lender's discretion.
- Interest rate: Your interest rate will be fixed or variable. The rate will be determined by factors like the loan term, the type of boat, your creditworthiness, and market conditions.
- Repayment terms: Repayment terms will vary, but you can expect to find terms of 10 to 15 years. Some lenders have repayment terms of up to 20 years. Unsecured loans typically have longer repayment periods than secured loans.
- Down payment: Some lenders will require that you pay a percentage of the total loan amount in the form of a down payment. Down payments typically range from 10% to 30%.
Types of Boat Loans
Secured Boat Loan
Secured boat loans require collateral. In most cases, the boat you purchase will serve as the collateral. If you are unable to make your loan payments, your lender could seize the boat.
Lenders may offer secured loans to people who have poor credit.
Unsecured Boat Loan
Unsecured boat loans don’t require collateral. Lenders will decide to offer an unsecured loan based on the borrower’s creditworthiness. This type of boat loan may come with a higher interest rate because it’s riskier for the lender.
Home Equity Loan
A home equity loan, also referred to as a second mortgage, enables homeowners to borrow against the equity they have in their homes. This is a type of secured loan; your home serves as collateral.
Home equity loans tend to have low interest rates, but if you're unable to repay the loan, you risk losing your home.
Personal Loan
Boat loans are a type of personal loan, but you can also consider a general personal loan to finance your purchase. Personal loans can be used to cover a wide variety of expenses, including a boat.
The interest rates and terms of personal loans can vary significantly by lender.
What Is a Vessel Loan?
Boat loans may also be referred to vessel loans. Vessel loans can also be used to finance purchases of commercial watercrafts.
Where to Get a Boat Loan
Banks
Some banks offer boat loans. For example, Regions Bank offers loans up to $75,000. Interest rates start at 9.24%, and its loan terms range from one to five years.
Credit Unions
Credit unions are nonprofit, member-owned institutions, and some offer boat financing. Patelco Credit Union has interest rates starting at 7.99% and loan terms of up to 15 years.
Online Lenders
Many online lenders specialize in personal loans, which can make them a good option for boat loans. SoFi offers loans up to $100,000. If you have excellent credit, you could qualify for an interest rate as low as 8.99%. The lender has loan terms of two to seven years.
Marine Dealerships
You may be able to apply for a loan through a marine dealership that sells boats. Some dealerships partner with boat loan providers to give customers access to dealer financing options.
What to Consider Before Applying for a Boat Loan
Before you apply for a boat loan, be sure to first consider:
- Your credit score: Your credit score will play an important role in determining the interest rates and terms that lenders offer. If you have poor credit, you may only qualify for a secured loan or a loan with a high interest rate. Boat loan credit requirements will vary depending on the lender.
- Your ability to repay the loan: A boat loan calculator can help you figure out the total cost of the loan. Will you be able to afford the monthly payments? If you can’t, you could risk damaging your credit and losing the boat.
- Total cost of ownership: The purchase price of a boat isn’t the only cost to consider. You also have expenses like gas, maintenance, taxes, boat insurance, and storage.
How to Apply for a Boat Loan
- Choose a lender: Find a lender that fits your needs. You may be able to prequalify without resulting in a hard credit inquiry to find the best rate.
- Gather the necessary information: The lender will want to know details about the type of boat you plan to purchase, as well as personal information on your income, assets, and debt.
- Apply: Some lenders have an online application process. Other lenders, such as banks and credit unions, may require you to apply in person.
Pros and Cons of Financing a Boat
Pros Explained
- Access to funds: A boat loan can give you access to the funds you need to buy your dream boat, which you otherwise might be unable to pay out of pocket for.
- Flexibility: With a multitude of lenders offering boat loans, you can shop around to find flexible terms that suit your needs.
Cons Explained
- Risk: A loan is a financial obligation. If you cannot repay it, you could damage your credit. In the case of a secured loan, you could also lose your boat.
- Depreciation: Boats depreciate over time. It’s possible that the boat will become less valuable than what you’ll owe your lender.
What Is the Average Interest Rate on a Boat Loan?
The interest rate on a boat loan is affected by market conditions, your creditworthiness, and the individual lender. As of September 2024, borrowers with excellent credit could expect to find interest rates on a 20-year boat loan starting at approximately 6.74%.
What Are the Average Terms for a Boat Loan?
You will find a wide range of terms for boat loans. Ten to 15 year terms is common. You can also find terms for just a couple of years or as long as 20 years.
Where Is the Easiest Place to Get a Boat Loan?
Many lenders provide boat loans. You can explore options offered by banks, credit unions, online lenders, and marine finance companies. The application requirements and process will vary depending on the lender.
How Are Super Yachts Financed?
Super yachts are extravagant vessels that are significantly larger than standard private yachts. These yachts are purchased by multimillionaires and billionaires. Buyers can pay upfront. Alternatively, they can explore leasing options or a marine mortgage.
The Bottom Line
A boat loan can be a useful financing option if you have always dreamed of getting out on the water in your own boat. Like any other loan, it's important to consider all of your options and compare interest rates and loan terms before making a decision.