Finance your summer fun for years to come by comparing boat loans with low rates.
How does a boat loan work?
A boat loan can be a secured personal loan that is designed to specifically finance a boat, a more general secured loan that allows boats to be used as a guarantee or an unsecured personal loan with no collateral. If you’re looking for a competitive rate, you may want to consider using the boat as security for the loan.
Boats can be expensive, so you’ll find these loans offer larger loan amounts and may allow you to pay over multiple years, rather than just three to five.
Compare lenders to finance a boat purchase
How much does a boat cost?
Every boat has its own purchase price, but that isn’t the end of the costs. You’ll need to prepare you budget for the ongoing expenses of boat ownership before your set sail.
- The boat purchase. The actual cost of a boat can vary greatly depending on the type of vessel and its age. You can expect to pay anything from $25,000 for a new motorboat to well over $1 million for a new yacht.
- Boat equipment. Consider the costs of decking out your boat. Electronics, water toys, accessories and safety equipment could set you back $1,500 or more.
- Operating costs. This cost will vary by the type of boat you choose and how you use it, however, the price of fuel should be a big part of your budget.
- Boat maintenance. The older your boat is, the higher its maintenance costs. But all boats need regular maintenance to remain safe, so do your research when selecting a model and mechanic.
- Storage. Mooring fees are calculated by the length of your boat and if you store it in a high rate area.
- Boat insurance. Depending on the type of boat you have and where you store it, insurance can cost you as little as $100 a year.
What kinds of rates and terms can I expect?
Boat loans are a type of personal loan, with rates starting around 4%. Will you actually qualify for that 4% APR? It’s not likely: Only borrowers with an absolutely stellar credit history, six-figure income, low debt-to-income ratios who are interested in borrowing large amounts can qualify for the lowest rates. For everyone else, you can expect APRs up to 36%, though you’ll need to make sure such a high rate is legal in your state.
Many lenders specializing in boat loans offer terms of up to 20 years. With a 20-year loan, your monthly repayments will be low but you’ll end up paying much more in interest. It’s more financially viable to borrow for the shortest amount of time possible to keep your interest down, even if that means larger monthly payments.
When searching for a boat loan, compare the APR you’re given with your term. If it will cost too much month-by-month or if you’ll pay thousands of dollars extra in interest, keep searching. There is likely a better deal out there.
What do lenders look for in a borrower?
There’s more to purchasing a boat than finding a good deal. Making yourself a good candidate for lenders will go a long way in getting you low financing for your big purchase.
- Steady source of income. The first thing every lender looks at is your income. How much do you earn? Can you afford a large monthly payment? These are important questions that may make or break your application.
- Low debt-to-income ratio. Your current debts will also play a role. Lenders want to make sure you won’t be overextending yourself — and putting yourself at risk of default — when you borrow a boat loan.
- Liquid assets. Some boat loans may not require security beyond the boat itself, but lenders will still want to see that you can handle payments should your employment or income situation change drastically.
- Good to excellent credit. A high credit score indicates you know how to handle your debts. Lenders look for borrowers with good to excellent credit because they know it means you pay your loan bills on time.
- Experienced boat owner. Experience with a boat isn’t a must, but it may make a lender more confident when issuing a loan. Having had a boat in the past means you likely know the full cost and are prepared for a new boat.
How can I compare boat loans?
Finding the right financing for your boat is important. When you’re comparing your options, keep the following questions in mind:
- What is the interest rate? The interest rate for a boat loan varies depending on what provider you go with, but rates for secured loans are generally lower. Dealer financing may be more expensive than getting a loan in advance, so be sure to compare your rates before hitting the water.
- What is the repayment schedule? Boat loans are generally fixed, meaning you pay the same amount every month, but you may find some that fall under variable rate. Which you choose is up to you, but understand the difference before investing in a boat.
- How much can you borrow? Just because you’ve found the boat of your dreams doesn’t mean you can find financing. Many lenders require a down payment of 10% to 20%, and most won’t offer more than $100,000 for a boat loan.
- How long will your loan term be? The longer the loan term, the more you’ll pay in interest. However, this also means you have lower monthly repayments. Calculate how much you can afford to pay and negotiate terms that suit your budget.
- Is the loan secured or unsecured? Boat loans can be secured or unsecured, so you’ll need to consider which one offers you better benefits over the long run.
What are the benefits of financing a boat purchase?
- Specialized loans. Some lenders offer loans that are specially designed to finance a boat. These take into account the long term you might need and the larger amount it takes to buy a solid vessel.
- Potential of fast approval. Boat loans usually have a quick turnaround time once you complete the online application. You may be able to finish the financing process within a few days.
- Competitive interest rates. There are competitive interest rates available for boat loans, generally because your lender will secure the loan with the boat itself.
Are there any drawbacks?
- Large loan amounts are required. Boats can be expensive and that translates to a larger loan amount. Choose a term that keeps your monthly payments manageable.
- May not cover extra costs. You need to consider ongoing boat maintenance, boat insurance, marine equipment and storage fees as well as the cost of the boat. These costs usually can’t be added to a secured loan.
- Depreciation. Boats are more like cars than houses. Once you make a purchase, your vessel will begin to depreciate. If you’ve invested too much into a boat, you may end up paying much more for a boat than it’s really worth.
What types of boats can I finance?
Is there anything I should avoid with boat loans?
- Unlicensed credit providers. Signing up for a loan with an unlicensed provider is a dangerous mistake. Be sure the lender is licensed to operate in the state where you live.
- Paying too much. Getting buried in debt can be an easy thing to do once you start adding features to your vessel. Know what you want and how much you can spend before signing up for a loan.
- Deals that seem too good to be true. If you find a deal online or otherwise that’s in a different league than the competition, do some poking around — it could be a sign of a scam.
How do I apply for a boat loan?
While every lender will have its own unique application process, in most cases, you’ll need to provide the same information when applying for a boat loan.
- Start by comparing your options in the table above.
- Click Go to Site once you’ve found a lender with good terms.
- Fill out the application with details about yourself and your income.
- Apply for the loan and see if you’ve been preapproved.
- If you have, work with the lender to discuss your needs and finalize your loan.
A boat can be a major source of summer fun. From fishing to watersports, boats are versatile and may be a good investment for your family and friends. However, the quick depreciation and large loan amount necessary to finance them may make it difficult to afford this type of luxury. Budget carefully and compare your personal loan options so you know you’re getting a good deal.