A boat loan is a type of installment loan used to purchase a boat or other watercraft. Like a car loan or traditional personal loan, a boat loan typically comes with a fixed interest rate and a stated repayment term.
The average price of a new boat ranges from $15,000 to $75,000, according to the National Boat Owners Association. Luxury vessels can cost millions of dollars. Lenders and boat dealers offer loans that spread the cost over a payable period.
What is a Boat Loan?
A boat loan is a personal installment loan used to purchase a boat or other watercraft, meaning that funds are transferred in a lump sum and paid back in pre-determined monthly payments. The average term for a boat loan is between 2 and 15 years, although some lenders offer repayment terms of up to 20 years for larger loan amounts.
Dealers typically offer secured boat loans, which require collateral to repay the loan. Most non-dealer lenders offer unsecured personal loans that don’t require collateral, but they can be difficult to get approved for.
How do boat loans work?
Each lender has their own loan terms, eligibility criteria, and restrictions. Unlike traditional lending products, boat loans come in both secured and unsecured forms. The boat loan available to you will depend on your financial situation and the lender you deal with.
- Loan amount: When purchasing a boat with a personal loan, you can borrow anywhere from $1,000 to $100,000, depending on the lender. If you choose dealer financing, the amount you can borrow will be based on a number of factors, including your credit score and your vessel.
- Repayment Terms: Most lenders offer boat loans with repayment terms of up to 15 years, but it is possible to find terms up to 20. Unsecured boat loans often have shorter terms, up to about 7 years.
- down payment: Not all lenders require a down payment, and if your lender does, you’ll likely pay between 10 and 20 percent of the boat’s purchase price.
- interest rate: Like any loan, boat loan interest rates are based on your credit and financial situation, with most lenders’ annual percentage rates (APRs) ranging from 8 percent to 35.99 percent.
You can use our boat loan calculator to estimate your payment based on the terms you want and the expected APR. As of September 2024, the average interest rate for a personal loan is 12.35 percent. Any interest rate below this average is considered a good interest rate.
Types of Boat Loans
Lenders that offer boat financing typically offer both secured and unsecured loans. Secured loans, while riskier for the borrower, often have better terms than unsecured loans. But both have advantages and potential drawbacks that can impact your financial situation for years to come.
To set yourself up for financial success, review your finances to determine what type of loan best suits your current budget and long-term goals.
Secured Boat Loans
Who is a Secured Boat Loan Best For?
Secured loans are best suited for borrowers with fair to good credit who can be sure of making monthly payments until the balance is paid off in full.
A secured boat loan uses the boat you’re buying as collateral. It can last up to 20 years and has a much lower monthly payment than an unsecured loan. Most unsecured personal loans have a maximum term of 7 years. Also, if you have bad credit, you’re more likely to be approved for a secured loan because the lender can repossess your boat if you default.
However, a longer term means you’ll pay more interest over time, so carefully consider how much your monthly payment will cost relative to the total loan amount before you choose a longer term.
Other risks with secured loans include non-traditional payment and interest rate structures. For example, some loans have adjustable rate loans, which fluctuate based on market conditions. They also may have balloon payments, which means you make lower monthly payments in exchange for a larger lump sum at the end of the loan.
Types of Secured Boat Loans
- Secured Personal Loans: Some lenders offer general secured personal loans, but this is rare and you may need to pledge a savings account or CD as collateral. Depending on how much money you have as collateral, some banks, such as Fifth Third Bank, offer secured loans of up to $500,000. Make sure the lender allows you to use the funds for boat-related expenses.
- Secured Marine Loans: Marine dealers may also offer in-house or third-party loans that you’ve already approved for boat-related purchases. These loans may also come with their own benefits, such as extended service plans or insurance coverage.
- Mortgage: A home equity loan is secured by the equity value of your home. Most lenders allow you to borrow up to 80 to 90 percent of your home’s equity, so it might seem like a good option for people who have paid off their mortgage. However, like any secured debt, you run the risk of losing your home or property if you default.
Unsecured Boat Loan
Who is an unsecured boat loan best suited for?
Borrowers with good credit will benefit most from unsecured boat loans. Those wanting to purchase an older model may also need to opt for an unsecured loan.
Unsecured loans are low amounts and short terms, so they may be a good choice for financing an older, used model. However, they often have a wide range of minimum and maximum interest rates. We recommend getting pre-qualified from multiple lenders before officially applying. If pre-qualification is offered, you can see in advance the interest rate you’ll receive after submitting a formal application.
An unsecured loan can be used for almost any purpose, but borrowers are encouraged to ensure they can use the funds for boat-related expenses.
The pros and cons of boat loans
A boat is a big long-term expense, so consider both the pros and cons before you shell out any money to ensure you get the best option for your needs.
- Split the cost into smaller, more manageable installments
- Depending on the lender, boat-related items may also be covered.
- If you have a high credit score, you will get a lower interest rate.
- Longer contracts mean lower payments
Cons
- It may be difficult to get approval for a large amount
- Secured loans carry the risk of losing the collateral in the event of default.
- High interest rates can mean you end up paying much more than you originally borrowed.
- The longer the loan term, the more interest you pay over the life of your loan.
Is a boat loan right for me?
If you qualify for a low interest rate and can afford to repay the loan on time, taking out a boat loan is a smart choice. Boats are expensive, so for most people, taking out a loan is the best decision if you can manage the repayments over the life of the loan.
Conversely, if you can’t afford the payments, a boat loan may not be a wise choice. You also need to consider the maintenance costs of owning a boat. Like a car, a boat costs more than you can afford in monthly payments, so you need to be able to cover docking fees, insurance, and other regular costs before renting one.
The final factor to consider is whether to buy a new or used boat. The price and maintenance costs of a boat will vary depending on the age of the vessel. New boats are more expensive, but may require just as many repairs as older, used models.
Conclusion
Taking out a boat loan is a long-term contract and there are various risks involved if you miss your monthly payments. Before you go ahead, review your financial situation and make sure you can repay the loan on time. If you decide a boat loan is right for you, get pre-qualified from multiple lenders to compare boat loan offers.
