A boat loan is an installment loan, often a personal loan, used to finance the purchase of a boat or other marine craft. Similar to auto loans and traditional personal loans, these loans typically feature fixed interest rates, monthly payments, and a set repayment term.

Boats can be quite costly, with new boats averaging between $15,000 and $75,000, while luxury vessels can run into the millions. To make these expenses more manageable, financial institutions—including banks, online lenders, and marine-specific dealerships—offer loans that allow you to spread the cost over an affordable term.

What are boat loans?

Boat loans are installment loans designed for purchasing boats or other marine craft. These loans provide a lump sum upfront, which you repay through predetermined monthly payments. Loan terms typically range from two to 15 years, though some lenders may extend repayment up to 20 years for larger loans.

Dealerships usually offer secured boat loans, which require collateral to back the loan. In contrast, most non-dealership lenders provide unsecured personal loans that don’t require collateral but can be more challenging to qualify for.

How do boat loans work?

Boat loan details and usage restrictions vary by lender. Unlike traditional lending products, boat loans can be either secured or unsecured. The options available to you will depend on your financial health and the specific offerings of the lender.

Loan amount

Boat loans can range from $1,000 to $100,000. As with other types of loans, the amount you’re approved for depends on your creditworthiness and the lender’s maximum loan limits.

Repayment terms

Most lenders offer boat loans with repayment terms up to 15 years, and some institutions extend terms to 20 years. However, unsecured boat loans typically have shorter terms, often maxing out at around seven years.

Down payment

Not all lenders require a down payment. If a down payment is required, you can typically expect it to be between 10 and 20 percent of the boat’s purchase price.

Interest rate

Boat loan interest rates are similar to personal loan rates, where the most favorable rates are reserved for the most creditworthy borrowers. Most lenders offer annual percentage rates (APR) ranging from 8 percent to 35.99 percent.

As of May 2024, the average personal loan rate is 12.20 percent. Any rate below this average is considered a good rate.

Types of boat loans

Lenders offering boat financing typically provide both secured and unsecured loan options. Secured loans, though riskier for the borrower, usually come with better terms compared to unsecured loans. However, both types have their advantages and potential drawbacks, which could impact your financial health for years to come.

To ensure financial success, conduct a thorough financial audit to determine which loan type aligns best with your current budget and long-term goals.

Secured boat loans

Secured boat loans use the boat being purchased as collateral, often offering terms up to 20 years. This results in lower monthly payments compared to unsecured loans, which typically have terms up to seven years. Secured loans may also be easier to obtain if you have lower credit since the lender can repossess the boat if you default.

However, with longer terms, you will pay more in interest over time. Secured loans are recommended only if you have a steady income to comfortably make the monthly payments. Financing an older used boat may be challenging, as many lenders have specific year and model requirements.

Other risks of secured loans include nontraditional payment or rate structures. For instance, some have variable rates that fluctuate based on market conditions, and others may require balloon payments, where you make one large lump-sum payment at the end of the loan.

Types of Secured Boat Loans

  • Secured Personal Loans: Some lenders offer generic secured personal loans. Unlike marine-specific loans, these often require opening a checking account to act as collateral. Some banks, like Fifth Third Bank, offer secured loan amounts up to $500,000. Ensure the lender allows its funds to be used for boating-related expenses.
  • Secured Marine Loans: Marine dealerships may provide in-house or third-party loans pre-approved for boating purchases. These loans can come with perks like extended service plans and insurance coverage. Be sure to know exactly what you want and can afford before inquiring to avoid high-pressure sales pitches.
  • Home Equity Loans: These loans use the equity built up in your home as collateral. Most lenders allow borrowing up to 80 or 90 percent of your home’s equity. This can be an attractive option if you’ve paid off your mortgage, but defaulting on the loan or missing payments can risk your home or property.

Unsecured boat loans

Unsecured loans are common and ideal for financing older, used boat models, as they typically come with lower amounts and shorter terms. However, they often have wide minimum and maximum rate ranges. To get the best deal, prequalify with multiple lenders before officially applying.

While unsecured loans can be used for almost any purpose, borrowers should confirm that the funds can be used for boating-related expenses.

Pros and cons of boat loans

How does boat financing fit into your budget? Boats represent significant, long-term expenses. To ensure you make the best choice for your needs, weigh the pros and cons before committing.

Pros:

  • Breaks up the cost into smaller, more manageable monthly payments.
  • Funds may be used for boating-related expenses, depending on the lender.
  • Lower rates are available for those with good credit.
  • Longer terms can result in lower monthly payments.

Cons:

  • Approval may be challenging, especially with less-than-perfect credit.
  • Secured loans risk losing your collateral if you miss payments.
  • High interest rates could result in paying more than the original loan amount.
  • Extending the loan term means paying more in interest over time.

In Conclusion

Taking out a boat loan is a significant long-term commitment that carries risks if you miss payments. To secure the best rate, prequalify with multiple lenders and compare their boat loan offers carefully.