How to get a boat loan

Boating is a popular pastime in the U.S., with an estimated 85 million Americans getting out on the water each year. But owning your own boat can come at a high cost.

A boat loan could make a boat purchase more manageable by spreading the cost over time. Before applying, it’s important you understand how boat loans work, what they cost, and what you need to do to get one.

What is a boat loan?

A boat loan is a type of financing specifically used to buy a new or used boat. Rather than paying the full cost upfront, you borrow the money from a lender and repay it over time in scheduled payments.

Boat loans can be used for different types of vessels, including:

Fishing boats
Sailboats
Pontoons
Speedboats
Cabin cruisers

How much you can borrow, the repayment term, and the interest rate can vary depending on the lender and your financial situation. Boats are typically expensive, so boat loans are often bigger than other personal loans.

Some boat loans are secured by the boat itself, while others are unsecured personal loans you use to make the purchase. Therefore, loan terms and lending criteria can differ depending on the type of financing you choose.

How do boat loans work?

Boat loans work in a similar way to many other types of loans. Once your application is approved, the lender sends you the money to buy the boat you want, and you repay the loan over time through regular payments.

The amount you can borrow and the repayment terms usually depend on your credit history, income, the type of boat, and the lender’s requirements. Some lenders may also require a down payment, especially for more expensive purchases.

It is common for boat loans to be secured against the boat you buy. This means the lender could repossess the boat if you are unable to repay the loan as agreed. You can also use an unsecured personal loan to buy a boat, but this can come with different terms and costs.

Before accepting any loan offer, make sure you review the repayment schedule, total loan cost, and any fees. Only agree to a loan if you’re confident it will fit into your budget.

How much do boat loans cost?

The cost of a boat loan includes more than just the purchase price of the boat. Understanding the full cost can help you plan your budget and avoid unexpected expenses before taking on financing.

Principal: This is the amount you borrow to pay for the boat after any down payment or trade-in has been applied.
APR and interest: The Annual Percentage Rate (APR) reflects the cost of borrowing money. Interest is added to your payments and impacts the total amount you repay over the term of the loan.
Fees: Some lenders may charge fees, such as loan origination or processing fees, which can increase the total cost of financing.
Down payment: Some boat loans require an upfront down payment. This reduces the amount you need to borrow and may also affect the loan terms you are offered.
Loan term: The length of the repayment term can significantly affect the overall cost. A longer term can reduce your monthly payment but increase the total interest you pay over time. A shorter term may cost less overall, but monthly payments will usually be higher.

Boat loans can be for large amounts and repaid over long repayment periods. Therefore, it is important to review the full cost before applying and make sure you can comfortably afford the repayments.

Types of boat loans

There are several different ways to finance a boat purchase, and the right option for you depends on your finances and how much you need to borrow.

Secured boat loans

A secured boat loan uses the boat as collateral, which means the lender could repossess it if you’re unable to make your repayments or you default on the loan.

This is one of the most common types of boat financing. Because the security reduces the lender’s risk, secured loans can come with lower interest rates than unsecured alternatives.

Unsecured personal loans

You can use an unsecured personal loan to buy a boat. With this type of financing, the boat is not used as collateral. This type of loan can offer more flexibility, but the interest rate may be higher because the lender is taking on more risk.

Unsecured loans are typically for smaller amounts than secured loans, so they might not be suitable for an expensive boat purchase.

Dealer financing

Some boat dealers offer financing directly or through lenders they are partnered with. This can make the buying process easier, as the loan can be arranged at the same time as the boat purchase.

However, it is still important to compare the loan with other options before agreeing, as dealer financing might not offer the lowest rates or the best terms.

Marine lender financing

Some lenders specialize in boat and marine financing. The loans they offer can be designed specifically for boat purchases and can offer terms that reflect the type, age, or value of the boat.

In some cases, specialist marine lenders may also have more experience with high-value purchases or used boats than general lenders.

Before choosing a loan, it can help to compare interest rates, fees, repayment terms, and whether the loan is secured or unsecured.

Can you get a boat loan with bad credit?

It is still possible to get a boat loan with bad credit, but your options may be more limited, and you may be offered higher interest rates or be asked to make a larger down payment.

Lenders consider several factors when reviewing an application, including your credit history, income, existing debts, and the amount you want to borrow.

Some lenders may place more weight on the boat’s value and your ability to repay the loan. Choosing a less expensive boat or borrowing a smaller amount could improve your chances of approval.

Before applying, review your credit report, compare lenders, and think carefully about whether the monthly payments fit your budget. Even if you do qualify for financing, the total cost may be higher if you have bad credit.

If you decide a boat loan is the right option for you, following these steps before applying can improve your chances of approval.

Review your budget: Work out how much you can afford to spend on monthly loan payments and other related costs, like insurance, storage, maintenance, and fuel.
Check your credit: Reviewing your credit score can help you understand the rates and loan terms you may be eligible for.
Decide what type of boat you want: The price, age, and type of boat can all affect the loan amount and terms available to you.
Compare lenders: Look at interest rates, repayment terms, fees, and whether the loan is secured or unsecured. Comparing options can help you find a loan that fits your needs.
Save for a down payment: Putting money down reduces the amount you need to borrow and can improve your chances of approval.
Submit your application: Once you have chosen a lender, apply by providing details about your income, employment, and the boat you plan to buy.

Preparing ahead of time can help you make an informed decision and avoid taking on a loan that does not fit your needs or budget.

Pros and cons of boat loans

A boat loan can help you spread the cost of a purchase over time, but it also comes with financial responsibility. Understanding the pros and cons can help you decide whether financing a boat is the right choice for you.

Pros of boat loans

Allows you to spread the cost of a boat over time
May make a more expensive purchase more manageable
Can offer predictable monthly payments
May provide access to a wider range of boats than paying in cash alone
May help you maintain savings for other expenses or emergencies

Cons of boat loans

Interest increases the total cost of the boat
Monthly payments can be a financial commitment for several years
Some loans require a down payment
You still need to cover insurance, storage, maintenance, and fuel costs
Missing payments could put the boat at risk if the loan is secured

Is a boat loan right for you?

A boat loan may be a good option if you want to spread the cost of a purchase over time and are confident you can afford the payments. It may also help if you want to retain some of your savings rather than pay the full cost upfront.

However, the loan payments are only part of the total cost of owning a boat. Before applying, it is important to consider additional expenses such as insurance, storage, maintenance, fuel, and repairs.

A boat loan may be more suitable if you have a steady income, a clear budget, and an understanding of the full cost of boat ownership. Taking time to compare lenders, review the loan terms, and consider your long-term finances can help you decide whether financing a boat is right for you.