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  1. Boat Financing: How to Finance a Boat
August 10, 2022

Boat Financing: How to Finance a Boat

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Purchasing a boat can be a lot of fun, especially for first-time boat owners who are excited to choose accessories and aesthetic options for their boat. But a vital component of the boat-buying process is securing financing. These steps will guide you through what you need to know about important parts of boat financing, including getting a boat quote, pre-approval, understanding types of loans and making payments.


Boat Loans


Boat loans are not unlike other large purchases – if you’ve ever bought a car or a house, you might have some experience with the basics. Boat loans tend to be fixed rate, fixed term, simple interest loans that are secured by the boat being purchased. Unlike the auto industry, the volume of boat sales is much lower, so you probably won’t see the same types of promotions, discounts or rebates that you would with a car purchase, and interest rates may be higher than in other scenarios.


How Do Boat Loans Work


Financing a boat generally involves making a down payment for part of the purchase price. The rest of the price is then borrowed from a lender. In the case of trade-ins, the equity you’ve built on your boat can help reduce the total loan amount. In either case, you will then pay interest over a fixed amount of time as the borrowed money is paid back. It’s good to note that while loan payments for the boat purchase are a big part of the overall cost of a boat, there are other costs that come with owning a boat, such as maintenance, storage, insurance and operating expenses that need to be part of your budgeting process.


How to Get a Boat Loan


Like other types of loans, boat loans are available from many sources. Options include a bank or credit union, or your dealer may be able to directly finance your purchase. Marine-specific financing companies are also a good option, as they are particularly familiar with the details of boat loans. Before applying for your loan, you should research specific requirements of your chosen institution. If the boat is new or you’re buying from a dealer, it may not be necessary, but in purchases involving used boats, some lenders require marine surveys and lenders typically require insurance. During your application process, lenders will consider your credit score, income and debt-to-income ratio and overall liquidity. The final terms of the loan will also be affected by the size of the down payment and the length of the loan.


How to Get Boat Loan Pre-Approval


Pre-approval is the initial step in applying for a boat loan. Your lender will check your credit and decide if you are a good loan candidate, as well as how much they are willing to approve for you for a loan. This will help you calculate how much you need for a down payment, as well as interest rates and terms.


How Long Can You Finance A Boat


Like buying a house, when you finance a boat, you spread the overall cost of the boat out over several years and pay back interest over that same period. As with all loans, the time you’re allotted for repayment is called the “term” of the loan, and will impact your interest payments as well as monthly payments.


Boat Loan Terms


Typical boat loan terms are between 10 and 20 years, varying based on down payment, credit score, income and the loan amount. Depending on your boat’s size, you could negotiate for shorter loans if you so desire. You can also choose to reduce the principal with additional payments, but the monthly payments will remain the same throughout the loan’s life.


Boat Loan Rates


Borrowers with strong credit can expect boat loan interest rates in the 4% to 5% APR range for new and used boats. This takes into account current market rates, the boat down payment and your intended estimated boat loan payments. Some lenders offer options for buyers with less than perfect credit and some cut out the waiting by offering instant approvals online.


Boat Payments


Staying up to date on your monthly payments is the most important part of owning your boat once you’re ready to go out on the water. Lenders typically have various options available to make it easier for you, including auto payments and online portals. Be sure that you have a method in place for payment so you never miss a month.


Calculate Boat Payments


How much your monthly payments are will vary depending on the purchase price of your boat, down payments and the loan’s terms. You must be positive before you complete your purchase that you can afford your monthly payments and that you’ve budgeted for your other boat-owning expenses. If you want to calculate your payment ahead of time, there are a number of online resources available to help you estimate your boat payment.