When and why to refinance a boat loan


By ,
Ask a Lender
October 9, 2017 | Updated October 16, 2017


Two-men-adjusting-sails-aboard-sailboat-on-ocean

Key Points

Factors to consider before refinancing a boat loan

  • Don’t look solely at interest rates as your reason for refinancing.
  • Know whether any credit blemishes could keep you from qualifying for a lower rate.
  • Think about other loan products, such as a home equity loan or personal loan, that may be more cost-effective.
  • Understand that lenders may offer different financing options if your boat serves as a home or business asset.
  • Cash-out refinancing to capitalize on a boat’s equity may be possible.

Boat loans are similar to home mortgages, auto loans and student loans in that they can be refinanced to take advantage of lower interest rates, resulting in lower monthly payments.

Before refinancing a boat loan, however, you should analyze a few factors to make sure your time and effort will result in the desired cost savings.

What are the options?

Historically low interest rates during the past few years have caused many people to pursue refinancing opportunities on their consumer loans, including boat loans. On the surface, refinancing may seem like a no-brainer if your existing boat loan has an interest rate of 6.5 percent and a different lender is offering a rate of 4.5 percent.

Ask yourself a couple questions before committing to a refinance, however. First, do you intend to sell your boat within the next few years? If you don’t plan to keep your boat for the foreseeable future, closing costs on a loan refinancing — such as processing fees, title and registration — could erase any interest-rate savings, because it takes time to repay those costs.

Next, have you had any recent setbacks to your credit? A delinquency, bankruptcy or other factors can cause your credit score to drop, which may automatically disqualify you from a lower interest rate on a boat loan.

Consider what you are trying to accomplish by refinancing. Are you looking to pay off the boat loan sooner, or are you trying to reduce your monthly payments? A home equity loan, home equity line of credit (HELOC) or personal loan may help you achieve your goal with greater cost savings.

What does a lender look for?

Some lenders will allow you to refinance your boat loan regardless of the make or model. They will analyze factors such as your repayment history and prior experience with revolving debt such as credit cards, as well as installment debt like a mortgage. They will look for sufficient income levels and liquid assets that demonstrate a proven ability to manage and save money.

Loan terms for a boat are commonly two to seven years, although some lenders will help you refinance for 10, 15 or 20 years. Depending on the lender, the minimum loan amount can range from $5,000 to $25,000. Interest rates are typically 3.5 percent to 10 percent, depending on the loan amount and the borrower’s credit.

A lender may scrutinize the purpose of the boat. If you use the boat as a primary residence, for example, the standard loan term will likely be longer — up to 30 years — and expect to pay a higher interest rate than on a standard mortgage, and the closing process may take longer. If the boat is partially used for charter purposes, or is registered with a corporation or limited liability company (LLC), a lender may offer different terms, rates and other requirements in order to refinance. And, depending on the loan amount and age of the vessel, a marine survey or inspection may be required.

How do I start the process?

If your credit has improved or interest rates have dropped since you obtained a boat loan, refinancing may be a wise option. Start by contacting your loan servicer to determine your payoff amount. Ask them if they offer refinancing options. Look at other lenders to see the terms and rates they are offering, as well their loan fees, and calculate a projected monthly payment. Compare and then pick the lender that works best for you.

Depending on the lender you ultimately choose to work with, processing your application may take two to four business days. Disbursing funds may take an additional one or two days, once the lender has all the required paperwork.

Keep in mind that there’s no right or wrong answer for extending or shortening your repayment schedule. Some borrowers may have the ability to cover higher monthly payments and will refinance with the intention of paying off the loan more quickly. Other borrowers may have circumstances that make their current payment schedule unaffordable and are looking to lock in a lower monthly payment even if the loan clock resets to a longer term.

Home-mortgage programs commonly allow for cash-out refinancing, in which the borrower receives cash based on their equity in the property at the time of the refinancing. A cash-out refinance may or may not be possible for a boat loan, so check with your lender.


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