Mortgages and car loans are debt that most borrowers will take on in their lives, as houses and vehicles are commonly owned in modern society. Because boats are a recreational purchase, boat loans often come with stricter credit requirements and should only be taken on by borrowers who have steady, disposable income.
Where to Get the Best Boat Loan
You can apply for a boat loan at your own bank or credit union, as well as other banks or credit unions in your community. You can also look to online lenders, marine finance companies and boat dealers themselves.
When making a big purchase with a decade-plus repayment term, it makes sense to shop around for your boat loan to ensure you get the lowest annual percentage rate (APY) and the best terms. Make sure loans for the type of boat you want to purchase are even offered at a lender before applying, and make note of their requirements around used boats; some lenders will not offer loans for boats that are 20 or 25 years old.
Best Boat Loans of 2022
| Lender | Starting APR | Loan Amounts | |||
|---|---|---|---|---|---|
Bank of the West |
4.24% |
$10,000 to $2 million |
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LightStream |
4.29% |
$5,000 to $100,000 |
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Southeast Financial |
4.09% |
$15,000 to $4 million |
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Trident Funding |
3.99% |
$50,000 to $50 million |
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USAA |
5.80% |
$5,000 to $100,000 |
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iNet Lending |
Not disclosed |
$5,000 to $2 million |
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Bank of the West (Essex Credit)
- Flexible loan duration
- Low interest rates
- Wide loan amounts offered
Bank of the West does a lot of things right. There’s no prepayment penalty and They come to their loan decision in one to two business days. Bank of the West is super flexible on loan amounts, starting at just $10,000 for new and used boats and $25,000 for live-aboard boats. (Not all lenders offer a live-aboard program.)
Bank of the West boat loans run the gamut, from standard and custom power boats and sailboats to wooden boats, houseboats and pontoon boats. We are big fans of their clearly detailed APRs. Rather than just advertise a starting APR, Bank of the West lays out rates by loan amount and loan term. The transparency instills confidence when applying.
LightStream
- Same-day funding
- Unsecured boat loan
- Low starting APR
LightStream boat loans are unsecured loans, so there is no collateral required. There also aren’t any origination fees or prepayment penalties. You can get a loan amount as low as $5,000, but loans do top out at $100,000 (so no superyacht financing here). LightStream could be more transparent about credit scores, and while the starting APR (4.29%) is attractive, that includes an auto pay discount and excellent credit; APRs can climb as high as 20.49% for other borrowers.
Southeast Financial
- Low starting APR
- Loans available for bad credit
- Wide loan amounts offered
Southeast Financial is great for borrowers with bad credit. The lender could offer more transparency around credit requirements, fees and interest rates, but it’s a good lender to turn to when your credit is keeping you from getting approved elsewhere.
You can get a boat loan from Southeast Financial for any kind of watercraft. Their mantra is “if it floats, we finance it.”
Southeast Financial strives for same-day approval on loans (often fewer than 3 hours), but the actual funding can take several business days.
Note: Southeast Financial as a lender is not affiliated with Southeast Financial Credit Union in Tennessee.
Trident Funding
- Low starting APR
- Largest loan amounts offered
- Physical office locations nationwide
Trident typically requires 10% to 20% for a down payment, and the lowest loan amount they offer is $50,000, which may immediately disqualify them from your consideration, depending on the price of your chosen vessel.
Trident Funding works with more than 40 banks and credit unions to find borrowers the best deal and can typically approve a loan within 48 hours. You cannot, however, get a live-aboard boat loan from Trident Funding.
USAA
- Flexible loan duration
- Personal watercraft financing
- Small loan amount available
USAA has some of the most flexible terms available:
- For 12 to 72 months, you’ll need approved credit and to finance at least $5,000.
- For 84 to 120 months, you’ll need approved credit and to finance at least $10,000.
- For 180 months, you’ll need approved credit and to finance at least $35,000.
APRs vary based on borrowed amount, credit history and loan term. USAA does not disclose a credit score requirement.
A bright spot of USAA boat loans: You can also get a loan for personal watercraft, like Jet Skis, Sea-Doos or WaveRunners
iNet Lending
- No down payment needed
- Bad credit accepted
- 75% approval rate
While it’s not clear to borrowers at the start of the process what even a ballpark APR might be for a boat loan with iNet, some borrowers are drawn to the no-down-payment option for boat loans under $100,000. Though iNet does not publish a minimum credit score requirement, they make it known that they’ll consider borrowers with challenged credit — and approve 75% of applicants.
The process is quick (funding comes in as little as 72 hours), and terms are flexible (up to 20 year). The minimum loan amount is just $5,000 and that’s a plus.
How Boat Loans Work
Most of us can’t afford to dip into our savings to buy a boat, especially more expensive options like houseboats, pontoon boats and yachts. That’s where boat loan lenders come in. But how does a boat loan work? A boat loan is quite similar to a car loan, so if you’ve already financed an automobile, the process should feel familiar.
And just like with cars, you can take out loans for both new and used boats.
Down Payments for Boat Loans
Like with auto loans, you should be prepared to make a down payment (the size of the down payment will depend on the requirements of the online lender and your own credit history; the higher the down payment, the more favorable your monthly payments will be).
You may be able to find an online lender offering boat loans with $0 down, but in general, offering a down payment affords you better monthly payments and sometimes even lower interest rates.
With your down payment at the ready, you can browse for the best boat loans and apply for a set loan amount and repayment term when you’ve found the best lender for you. Interest rates will vary and depend on the strength of your credit history.
Repayment Terms for Boat Loans
As you can see from our list of the best boat loans, repayment terms can vary widely. Most lenders cap typical boat loan terms at 20 years, though Trident Funding is willing to go up to 25 years with a larger down payment. The key here is that these are secured boat loans. A secured boat loan means you have offered collateral (more on that below).
If you get an unsecured boat loan (basically, a personal loan for a boat), you won’t need to put up any collateral, but repayment terms will be much shorter. You can expect repayment terms akin to the typical installment loan. (Take a look at our roundup of the best personal loans here.)
Annual Percentage Rate for Boat Loans
Like with auto loans, you will want to shop around for the lowest boat loan interest rates. The best boat loans on our list start at APRs hovering around 4%, but those are typically offered for the strongest credit scores and shorter loan repayment terms. The longer you stretch your loan out, the more you can expect to pay in interest.For example, Bank of the West boat loans start at 4.24% for $100,000+ over four years, but by seven years, the APR jumps to 4.99%. At 20 years, that same loan nets a 5.49% APR.
Types of Boat Loans
There are three types of boat loans: succeed, unsecured and home equity. A secured loan is the gold standard for a boat loan, but it’s not your only option. Let’s explore the different options to get a boat loan:
Secured Boat Loans
Secured boat loans mean that you offer up collateral. If you default on your boat loan, the lender can repossess that collateral as payment. Just like with a car loan, where the car you’re financing serves as the collateral, the boat you’re financing serves as the collateral for your structured boat loan.
So default on your loan — and that boat will sail off into the sunset without you. (And leave you marooned with bad credit.)
Unsecured Boat Loans
You can apply for an unsecured personal loan with no collateral. This works just like any other personal loan, but instead of using it for a home renovation, debt consolidation or a medical emergency, you’d be funding your boat purchase with it.
We generally recommend unsecured loans only for necessities, as interest rates are high. (Because there is no collateral, lenders consider personal loans to be riskier). But if you do not qualify for a secured boat loan and think you can manage the increased cost of an unsecured loan, unsecured boat loans certainly give you more options.
Home Equity Loans For Boats
A home equity loan is a second mortgage. These loans allow you to borrow against the equity you have in your home and are typically fixed-rate loans (though you can also apply for a home equity line of credit, or HELOC). Loan amounts are calculated based on the current market value of your home less the remaining mortgage balance.
Home equity loans are typically recommended for investments that will increase the value of your home, like an addition, a kitchen renovation or a major landscaping project. Because these loans are risky, they are not the best choice for financing a boat.
How to Apply for a Boat Loan
Finding the perfect boat is only half of the process (and, let’s be honest, it’s the more exciting part). Now that you’ve found the winner, you’ve got to go through the hoops of finding a lender and getting approved for the loan. Here’s how:
1. Shop Around for Boat Loans
If you’re buying from a boat dealership, they will likely show you some options for boat loans. But you don’t have to sign on the dotted line there. You can try to find a better offer from a bank or credit union or an online boat loan provider from our list.
2. Get Pre-Approved
Don’t apply for multiple boat loans, as this can have a negative effect on your credit score. But if any boat loan lenders offer pre-approval without hard credit inquiries, it can’t hurt to see what rates you can get.
3. Have All Your Paperwork Ready
Getting a boat loan requires a fair amount of paperwork, especially when the boat is more expensive than a new car. Things you might need for the loan application includes information about your assets and debt, two years of verifiable income history and your Social Security Number and/or Individual Taxpayer Identification Number.
How Boat Loans Affect Your Credit Score
Boat loans can have a positive impact on credit scores. As long as you make your payments on time and in full, you can expect your score to increase. Creditors like to see that borrowers can consistently make on-time payments. If you default on your boat loan, that will have a more negative impact on your score.
However, credit scores can be affected both positively and negatively by a boat loan. Applying for any kind of loan requires the lender to do a hard inquiry into your credit history. This does have a negative impact on your score, but the effect is minimal, and the inquiry falls off your report rather quickly. Just don’t apply for multiple boat loans, as this will result in multiple hard inquiries and a greater impact to your score.
Late payments can bring credit scores down. If you are hoping to improve your score with a boat loan, it is important that you make all payments on time. If possible, set up automatic payments from a bank account that you keep well funded, that way you don’t even have to worry about making monthly payments on time.
The True Cost of Owning a Boat
When deciding if you can afford a boat, there are more factors to consider than the purchase price. Here are the expenses you should consider:
Monthly Payments
You will be on the hook for monthly payments for the whole duration of the loan. This is potentially a 20-year commitment.
Down Payment
Lenders vary in their requirements, but it’s not uncommon to put 10% to 20% down. For a $100,000 boat, that’s a down payment of $10,000 to $20,000.
Fees
Many lenders charge loan origination fees or closing costs. Factor these into your purchase.
In addition, you will need to consider docking fees and land storage fees if you aren’t keeping the boat in your driveway.
Registration and Taxes
Just like with a vehicle, you have to pay an annual fee to register your boat. You’ll also pay taxes on it.
Maintenance and Repairs
Also like vehicles, boats require regular maintenance and upkeep. Factor in the cost of routine maintenance for the type of boat you are purchasing, plus the cost of unexpected, larger maintenance needs from time to time. Winterizing your boat also comes at an expense.
Towing
Will you need to purchase any equipment for your truck or SUV to tow your boat? Or, even more important, will you need to invest in a new vehicle to be able to tow the boat at all?
Fuel
Gas prices continue to rise. Some boats take petrol while others use diesel. Unless you’re purchasing a kayak or canoe (or a truly motorless sailboat), you’ll need to plan on fuel prices.
Boat Insurance and License
You might feel free with the wind whipping in your hair as you hit that clear lake water, but you’re never truly free. Owning a boat means you need to carry boat insurance, and you’ll also need to pay for a boating license.
New Boats vs. Used Boats
Deciding between a new or used boat for your watercraft? There are pros and cons to each and various implications for your boat loan.
Pros and Cons of New Boats
Pros
- New boats are likely to have the latest technology and design.
- You aren’t limited to the pre-owned market. You can buy the exact boat you want — with the customizations that serve your needs.
- New boats are backed by a manufacturer’s warranty.
- New boats are less likely to encounter problems within the first few years of service.
Cons
- New boats are more expensive than used boats — both to buy and insure.
- A new boat depreciates 5% to 10% in the first year.
- It can be more challenging to get a loan for a new boat, depending on your credit score.
- Not all new boats are winners. When you buy used, you can read customer and expert reviews of past models.
Pros and Cons of Used Boats
Pros
- Used boats are cheaper to buy than new.
- Used boats are cheaper to insure than new.
- There is potentially a higher resale value because the depreciation is lower than a new boat.
Cons
- Used boats will require more maintenance and upkeep right out of the gate.
- You’ll have to pay for a marine survey if you require a loan.
- You won’t always know what you’re getting.
Frequently Asked Questions (FAQs) About Boat Loans
Still have questions about boat loans? We’ve taken the most common questions readers are asking and provided some quick answers.
Because boat loans are for recreational purposes — and not an investment, debt consolidation or emergency expense — a traditional structured loan, where the boat serves as collateral is the best.
Yes. While boat loans typically max out at 20 years, you can likely find multiple lenders who will give you a 10-year loan.
Most lenders require multiple days for loan approval and funding, but some boat loan providers promise (or strive toward) same-day credit approval and funding.
While many lenders require strong credit scores, some offer boat loans to borrowers with challenged credit. Just don’t expect to qualify for the competitive rates advertised on their site.
Dealers typically offer boat financing, but they’re not your only option. Review loan options from online lenders and your bank or credit union before making a final decision.
Timothy Moore covers banking and investing for The Penny Hoarder from his home base in Cincinnati. He has worked in editing and graphic design for a marketing agency, a global research firm and a major print publication. He covers a variety of other topics, including insurance, taxes, retirement and budgeting and has worked in the field since 2012.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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