Key learning points
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Boat loans are a type of personal installment loan used exclusively for expenses related to marine vessels.
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Online lenders, banks, credit unions and marine lenders offer boat loans, but some place restrictions on the type of boat you can finance.
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Not all lenders offer boat loans, but some allow you to use a personal loan for boating expenses.
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To qualify for a boat loan, you likely need an excellent credit score, a stable income, and a low debt-to-income ratio.
A boat loan is a type of installment loan (usually a personal loan) used to purchase a boat or other vessel. Like car loans and traditional personal loans, these installment loans usually have a fixed interest rate, monthly payments, and a fixed repayment term.
Boats can be expensive. The cost of a new boat averages $15,000 to $75,000, and luxury ships can cost millions. Financial institutions, from banks to online lenders and even marine dealers, offer loans to spread those costs over a term you can afford.
What are boat loans?
Boat loans are personal installment loans used to purchase boats or other marine vessels. This means that your money is sent all at once and is repaid in predetermined monthly payments. The average term of a boat loan can range from two to fifteen years, but some lenders extend repayment up to twenty years for larger loans.
Dealers typically offer secured boat loans that require you to repay the loan with collateral. Most non-dealer lenders offer unsecured personal loans that require no collateral but are more difficult to get approved for.
How do boat loans work?
Boat loan details and usage restrictions vary by lender. Unlike traditional lending products, boat loans are available in both secured and unsecured forms. What’s available varies based on your financial health and your lender’s offerings.
Loan amount
Boat loans can range from amounts as small as $1,000 to as large as $100,000. As with other types of loans, the amount you are approved for depends on your creditworthiness and the maximum loan amounts offered by the lender.
Refund Terms
Most lenders offer boat loans with repayment terms ranging up to 15 years, while some institutions offer repayment terms up to 20 years. The terms for unsecured boat loans are often shorter, with a maximum of about seven years.
Deposit
Not every lender requires a down payment. If the lender does require it, you can expect to make a down payment of between 10 and 20 percent of the boat’s purchase price.
Interest
Boat loan interest rates track personal loan rates in that the best rates go to the most creditworthy borrowers. Most lenders have an annual percentage rate (APR) ranging between 8 percent and 35.99 percent.
As of May 2024, the average interest rate on personal loans is 12.20 percent. Any rate that falls below this average is considered a good rate.
More information: Boat loan calculator
Types of boat loans
Lenders offering boat financing generally offer both secured and unsecured loans. Secured loans, although riskier for the borrower, often have better terms than unsecured loans. However, both have advantages and potential disadvantages that can impact your financial health for years to come.
To help you achieve financial success, conduct a financial audit to determine which type of loan is most reasonable for your current budget and long-term goals.
Secured boat loans
Who is a secured boat loan best for?
Secured loans are best for borrowers with fair to good credit, who are confident they can make the monthly payments until the balance is paid off in full.
With secured boat loans, the purchased boat is used as collateral. Terms can be up to 20 years, giving you a much lower monthly payment than an unsecured loan. Most unsecured loans have a term of up to seven years. You may also have a better chance of getting approved for a secured loan if you have lower credit, since the lender can take back the boat if you default.
With such a long term, you pay more interest over time.
We only recommend secured loans if you have enough steady income to make the monthly payments easily. If you want to finance an older used ship, it can also be difficult to find lenders. Most have year and model requirements.
Other risks of secured loans include non-traditional payment or rate structures. For example, some have variable rates, which fluctuate based on market conditions. You may also see balloon payments. In exchange for lower monthly costs, you pay one large lump sum at the end of the loan.
Types of secured boat loans
- Secured personal loans: Some lenders offer generic secured personal loans. Unlike loans specific to marine vessels, most lenders require customers to open a checking account. The amount in this account acts as collateral. Some banks allow users to borrow up to the amount in the account. Others, like Fifth Third Bank, offer guaranteed loan amounts of up to $500,000. Make sure the lender allows their money to be used for boating-related expenses.
- Secured maritime loans: Marine dealers can also provide in-house or third-party loans that have already been approved for boat-related purchases. These loans can also offer unique benefits such as extended service plans and insurance coverage. Just know exactly what you want and can afford before you ask for a loan. If you’re familiar with the ins and outs of boat loans, it will be harder to fall for high-pressure sales pitches.
- Mortgage loan:Mortgage lenders secure the loan with the equity you have built up in your home. Most lenders will allow you to borrow up to 80 or 90 percent of the equity in your home, which seems like a good option for those who have paid off their mortgage. However, as with other types of secured debt, you are risking your home or property if you default on the loan or cannot make the payments on time and in full.
Unsecured boat loans
Who is an unsecured boat loan best for?
Borrowers with excellent credit will benefit the most from an unsecured boat loan. Anyone who wants to purchase an older model may also have to opt for this type of boat loan.
Unsecured loans are common and ideal for financing older, used models as they often have lower amounts and shorter terms. However, they often have a wide minimum and maximum rate range. It’s a good idea to pre-qualify with multiple lenders before officially applying.
Although unsecured funds can be used for virtually any purpose, it is still encouraged that borrowers ensure they can use the funds for boating-related expenses.
Advantages and disadvantages of boat loans
How does boat financing fit into your budget? Boats are big expenses in the long run. To ensure you get the best option for your needs, consider both the pros and cons before plunking down any money.
Plus points
- Divides payment into smaller, more manageable installments.
- Depending on the lender, the money can also be used for boating-related expenses.
- Rates are low for people with a good credit score.
- With a long term, the payments can be low.
Cons
- It can be difficult to get approval for this.
- If the loan is secured and you stop making monthly payments, you risk losing your collateral.
- High interest rates can cause you to pay off more than you originally borrowed.
- If you extend the term of a loan, you will have to pay more interest over the life of the loan.
it comes down to
Taking out a boat loan is a long-term commitment that can come with risks if monthly payments are not made. To ensure you get a competitive rate, pre-qualify for multiple loans and compare boat loan offers.
