Set Your Sails on the Right Boat Loan

How to find the best boat lender

Get Started on Buying a Boat

Are you ready to break away from the landlubbers and set sail? If you’re in the market for a boat loan it’s wise to do a little research before you go shopping. While your vessel acts as the collateral securing the loan, specific rates, terms and loan conditions vary across lenders.

The first thing to do is determine what kind of boating you want to do. Do you prefer days of calm fishing on the lake, taking the family out wakeboarding or long weekend sailing trips? Would you use it enough to justify owning or would renting a couple times a year suffice? Is the vessel for play, work or full-time living?

Once you answer those questions, the next step is to check your budget and then find the best boat lenders to compare rates and terms.

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Credit Score

680 or higher

Loan Terms

5 to 20 years

Down Payment

10% to 20%

Time to Fund

2 to 4 business days

Boat Budgeting

Boat prices vary greatly, ranging from a few hundred dollars for a little dinghy to a few million for a slick yacht. When calculating your boat budget, account for the ongoing costs of boat ownership. These costs vary depending on the type of boat you get as well as your location, and include:

  • Insurance. If you have a loan, you’ll be required to have insurance. Once you own the boat, some states don’t require insurance, although you could be held liable in an accident.
  • Registration and taxes. Check with your state’s Department of Motor Vehicles for annual fees.
  • Documented vessel status. Pleasure boats of a certain size – 26 feet or longer – may be registered with the U.S. Coast Guard rather than a state.
  • Mooring and storage. Whether at the dock or in a storage yard, a parking spot for your boat typically requires a monthly fee.
  • Maintenance. Water — especially salt water — is hard on equipment. Regular cleaning, caulking, painting and scraping is essential. Don’t forget about periodic mechanic fees to help maintain the engine.
  • Fuel. Boats run on either diesel or gasoline.
  • Other costs. These may include a trailer and its registration fees, as well as a vehicle to tow the boat.

Home Sweet Boat

Some people want to live on the water. Whether your home is mobile determines what type of loan you need.

A houseboat, for example, has an engine for mobility, and so requires a boat or leisure vehicle loan. A floating home is a stationary structure that sits on the water and typically requires a home mortgage, although there are some additional eligibility requirements.

As a rule, if your boat has a bed, kitchen and toilet facilities, it can be considered a primary or second home for tax purposes.

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Boat Buying: New or Used?

Another consideration to boat buying is whether to purchase a new or used vessel. There are pros and cons for either.

New Boat
  • That new-boat shine
  • Protected by manufacturer’s warranty
  • Customizable
  • Expensive
  • Quick depreciation
Used Boat
  • More reasonable prices
  • Slow depreciation
  • Already customized
  • Warranty may have expired
  • Unclear history of usage and maintenance

Need a Boat for Business?

Commercial fishermen, charter operators, whale watching guides, and many other small businesses rely on boats to make a living. Talk to your lender about the financing options for business owners, such as through the U.S. Small Business Administration, or from various state-chartered fishing and agricultural banks.

Where to Get a Boat Loan

The best lender for you depends on the type of vessel and amount of money you’re looking to finance. Shop around and compare rates and fees, especially if you’re financing high dollar amounts.

  • Financial institutions. Banks, credit unions and other financial institutions offer loans for new and used boats, but some have limitations on loan amounts or vessel types.
  • Dealerships. Boat dealers often partner with preferred lenders to offer financing. Dealers have vast experience with the vessels they sell, and may have special pricing and terms to offer. Those deals may not always be the best for you, however.
  • Recreational boat associations. Check into memberships with boat clubs and associations. Many of the larger ones offer financing, and would have experience similar to dealers.
  • Marine financiers. These organizations specialize in financing boats and often are experienced in niches such as luxury vessels.

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Boat Loan Requirements

You may view that bass boat as a necessity to your mental health, but lenders tend to consider recreational boats as luxury items. That means boat loans have strict requirements for both the borrower and the boat being financed.

In general terms, if you borrow $75,000 or more, you’ll see longer loan terms of about 20 years and pay lower interest rates. Those borrowing up to $25,000 will see shorter terms of about 10 years but pay higher interest rates. For used boats, amounts and terms are similar, but interest rates may be higher, depending on the lender.

Borrower Qualifications

Check your personal finances before you talk to a lender. Below are some requirements you’ll need to qualify for a boat loan:

  • Credit score of 680 or higher
  • Debt-to-income ratio of less than 40 percent
  • Down payment of 10 percent to 20 percent
  • Tax returns and other financial documents
  • Preferably some boating experience

Boat Qualifications

Before you head to the lender’s office, take the time to gather the paperwork for the boat. In addition to the boat’s age, condition and value, lenders will assess the following documents:

  • Signed sales contract
  • State or federal registration documents
  • A marine survey report or mechanic review, if buying a used boat

Bad Credit and Boat Loans

If you have poor credit or have filed bankruptcy in the past, a boat loan will cost you. For borrowers with credit scores of about 500, lenders tend to offer sub-prime interest rates, which are much higher than typical rates. Lenders also tend to charge higher fees and closing costs on these types of loans. You may do better to save money and work to improve your credit score before you seek a boat loan.

Other Loan Types

There are other loan types you could consider if a boat loan isn’t right for you. You’ll still want to compare lenders and ask about fees and other costs.

  • Personal loan. These unsecured loans are taken out for a variety of purposes. Lenders generally offer loans of up to $50,000. Since there is no collateral, rates and fees would be higher than a typical boat loan.
  • Secured personal loan. A boat loan is essentially a secured loan, but some lenders allow you to offer up something else as collateral. Collateral could be virtually anything of value such as a car, house or savings account. If you default on the loan, the bank takes the collateral.
  • Home equity line of credit. If you have the equity in your home, you can take out a second mortgage or get a home equity line of credit to pay for your boat. A cash-out refinance is another option. If you default on the loan, you could lose your home.

Refinancing a Boat Loan

Refinancing is an option to consider if you’ve improved your credit or debt-to-income ratio since you took out the original loan for your boat. Refinancing can get you lower monthly payments or lower interest rates.

When you refinance, you replace your existing loan with a new loan, complete with new rates and terms. If you owe more than the boat is worth, you may be expected to pay the difference in value before being approved.

Leasing Options

If you think you’ll only go out a few times a year, or want to try out a specific boat before you buy, consider charter or leasing options.

  • Rent or charter. Similar to renting a car, you can rent a boat for a short time — from a few hours to a few days. Rentals could include small craft, such as canoes or paddleboats, or larger vessels, such as fishing or whale watching expedition boats.
  • Lease shares. Generally offered through boat clubs, boat lease shares are similar to a timeshare for a vacation condo. You, along with a group of others, have access to the boat during set time periods. Some clubs may allow you to pick from a fleet of different boats. The club handles insurance and maintenance on the vessels.
  • Lease with a purchase option. Similar to leasing a car, you sign a long-term lease agreement with the option to purchase the vessel at the end of the term. You pay monthly lease fees, which would go toward the purchase price. You have the option to walk away at the end of the term.

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