Boat loans: How boat financing works

Fallen in love with a boat? Compared with auto loans, financing a boat can be a much heftier investment.

Boats can be more expensive than a car, which means loan amounts can be higher and terms can be much longer.

Just how much you pay to finance a boat depends on a number of factors, including the type of boat loan you choose, the loan terms, your down payment and your credit.

Let’s take a look at the different types of boat loans, your financing options and how to apply for a boat loan.

  • Types of boat loans
  • How boat loans work: Typical boat loan terms
  • Where to get a boat loan
  • What to consider before applying for a boat loan
  • How to apply for a boat loan

Types of boat loans

Whether you plan to get a new- or used-boat loan, financing options include secured and unsecured loans. Each type of loan has benefits and drawbacks.

Secured loans

A secured personal loan is backed by collateral. If you default on the loan, the lender can take the collateral as a form of repayment.

In many states, if you stop making payments on your car loan, the lender can repossess it. Similarly, with a secured boat loan the boat acts as the collateral, which means the lender may be able to take it back if you go into default.

Unsecured loans

An unsecured personal loan doesn’t use the boat — or any other asset or property — as collateral. Since unsecured loans aren’t anchored to a specific asset, lenders view them as riskier and typically charge higher interest rates than with a secured loan. But you might have more options in how you use an unsecured boat loan compared with a secured boat loan.

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Second mortgage

If you prefer not to take out a personal loan, a home equity loan, which is a type of second mortgage, could be another option. This type of loan would use your home as collateral for your boat loan. Interest rates for secured loans tend to be lower than those for unsecured loans. That said, home equity loans can be particularly risky because the stakes are so high: If you default on the loan, the lender may be able to take your home.

How boat loans work: Typical boat loan terms

If you’ve had a car loan before, you already have a basic understanding of how a boat loan works. You can apply for a loan amount — minus any down payment — and a repayment term. If approved, the lender may offer competitive rates, depending on how strong your credit is.

Boat loan repayment terms

You can generally apply for up to a 20-year loan term for a secured boat loan, depending on the loan amount and lender. Unsecured boat loans — which are personal loans — tend to come with shorter terms (typically no more than five to seven years). The longer your loan term, the more you’ll pay in total interest on the loan.

Down payment may be required

Boat loan lenders often want to see a down payment, generally between 10% and 20%, depending on factors including the lender and the cost of the boat. Some lenders offer 0%-down loans — but keep in mind that making a down payment can hedge against the boat’s depreciation, or loss of value over time, and help prevent a situation where you owe more on your boat loan than the boat is worth. A down payment may also lower your monthly payment and reduce the total amount of interest you pay on the boat loan.

Interest rate

Interest rates on boat loans are typically fixed and can vary widely based on the lender and your credit profile. As of April 2023, some lenders offer starting annual percentage rates, or APRs, of about 7% to nearly 10% on secured boat loans. But factors such as the boat type and model year, your credit history, loan term and loan amount will affect your rate.

Where to get a boat loan

If you want to apply for a boat loan, you have a range of lender options — some banks, credit unions and boat dealers offer boat loans. Additionally, marine finance companies specialize in these types of loans. Here are some banks and credit unions that offer boat loans.

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Truist

Truist, formerly SunTrust, offers unsecured marine loans. The bank’s online lending division, LightStream, provides loans ranging from $5,000 to $100,000, with terms of 24 to 144 months — but the lender says you’ll need excellent credit for its lowest rates.

U.S. Bank

U.S. Bank provides loans of up to $150,000 for new or used boats, as well as refinancing. To qualify for the bank’s best rate, you’ll need to finance a new boat with a loan greater than $25,000 (no more than 100% of the boat’s value) and a term of 48 months or less. You’ll also need to set up automatic payments from a U.S. Bank personal checking or savings account.

Bank of the West

Bank of the West offers loans for new and used boats and personal watercraft. The minimum loan amount is $10,000.

Navy Federal Credit Union

Navy Federal Credit Union offers loans for new and used boats and personal watercraft, with terms of up to 180 months. Military members with direct deposit may qualify for a rate discount. Service members in all branches of the armed forces, along with their families and household members, are eligible for credit union membership.

USAA

USAA offers loans for both boat purchases and refinancing, with up to 180-month terms. The company also finances jet skis and personal watercraft. To apply for a boat loan, you must be a member of USAA. Current and former military members and their spouses and children may be eligible for membership.

What to consider before applying for a boat loan

Before you begin making plans to set sail on your new boat, here are some things to consider.

Your credit

Some lenders will offer a boat loan to borrowers with subprime credit, but they may still require a down payment and low debt-to-income ratio. Keep in mind that if you have lower credit scores, you’ll probably be offered a higher interest rate than if you have excellent credit.

The total cost of owning a boat

When determining your boat budget, don’t forget to factor in the costs beyond the monthly payments for your boat loan. These ongoing expenses might include slip fees, winterizing, towing, land storage, fuel, boat insurance, repairs, maintenance, registration and taxes.

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Whether you’ll need a marine survey

When you apply for a secured boat loan, the boat’s value will be a factor in how much you can borrow.

If you’re not getting a new boat, you should get a marine survey. During a marine survey, an inspector will examine the vessel, engine and trailer, detail the boat’s condition, note any repairs needed and determine whether it’s safe to take on the water.

How to apply for a boat loan

Applying for a boat loan is similar to applying for a personal loan or auto loan. You’ll need to find a lender first. In some cases, you can apply online. Otherwise you may be able to apply in person at a bank or credit union.

Next, you’ll typically need to provide information such as the loan amount, purchase price of the boat, type of boat and age of the boat — along with employment information and other personal info about your assets and debts. As with personal loans and auto loans, this could result in a hard credit inquiry to check your credit profile (note that this may lower your credit scores by a few points).

Then you’ll wait for approval, which could be available as soon as the next business day, or may take a few business days, depending on the lender you’re working with.

Next steps

Experienced boaters do everything possible to be prepared on the water — so it’s good to take the same approach with a boat loan. Here are some suggestions to find the financing you want.

  1. Shop around and compare offers from multiple lenders to find one that fits your financial needs.
  2. Apply for your boat loan.
  3. Review the terms carefully before deciding to sign. If it’s a go, get ready to sail the seas.

If you’re not able to find a boat loan after getting a few estimates and comparing your options, consider taking some time to build your credit, pay down your debt and save for a down payment. And remember to consider ownership costs in your overall boat budget to help avoid choppy financial waters in the future.