Boat Loan Terms: How Long Can You Finance a Boat?
Shopping for a new boat? Before you grab your swimsuit and take to the water, there are a few things you’ll need to know about boat financing.
For one, some boat loans are more like mortgages than auto loans, since the payments can stretch out as long as 20 years. Loan amounts can also vary widely, from $5,000 for a new jon boat to $5 million for a yacht.
Whether you should take on a long repayment will depend on several factors, including what you can afford to pay each month. In general, shorter boat loan terms come with lower interest rates but higher monthly payments.
How boat loans work
Like most other loan types, your ability to qualify for a boat loan will depend on your credit, debt and income. In order to apply for a boat loan, you’ll likely need to provide your Social Security number, income documentation and details on the boat you plan to buy.
What are typical boat loan terms?
Boat loan terms can be as short as a few years, but the average boat loan term is typically 10 to 20 years. Financing can vary from one lender to the next, but generally, here’s what to expect when you finance a boat:
- APR range: Prime loan rates may start around 6% to 7% APR for borrowers with excellent credit. The annual percentage rate (APR) on boat loans is typically fixed, giving borrowers predictability. Your APR may also depend on the purchase price of your boat.
- Down payment requirement: Some lenders don’t require a down payment, but most want 10% to 20%.
- Boat requirements: You may have trouble finding a loan for a boat that’s more than 20 years old.
- Minimum credit score: A minimum score of 600 is required by some lenders, but the majority only approve scores of 700 or higher.
- Upfront fees: Some boat lenders charge application and origination fees, processing fees and/or closing costs.
- Other fees: Your lender may also charge prepayment penalties or late fees.
What is the average interest rate for a boat loan?
Boat loan rates can start around 6% APR and may go well into double digits. To qualify for the lowest rates, you may need to make a large down payment, agree to a short repayment term length and have excellent credit. The age of the boat you purchase can play a role in your rate, too.
Use a boat loan calculator
LendingTree’s boat loan calculator can help you determine whether a loan will fit into your budget. Simply plug in your loan amount, interest rate and loan term to see what your monthly loan payment will be.
If the payment is too high for your budget, adjust your loan amount and/or repayment term to find what fits your needs. When you’re ready to start shopping for loans, you can fill out a single form with LendingTree and receive up to five boat loan offers from lenders.
Where to find a boat loan
There are lots of places to find a boat loan, so it could feel overwhelming to consider the options.
Your best bet is to start with a lender you know and trust, like your credit union or bank, but if you find better terms through a lender that’s new to you, check out their ratings with the Better Business Bureau before applying for a loan.
Banks, credit unions and online lenders
When you go through an online lender like BoatLoan.com, you can find boat loan rates that start as low as 5.99% APR.
Some banks and credit unions also offer special rate discounts to customers who have a checking or savings account. LightStream, the online division of Truist Bank, offers a 0.50% APR discount when you set up automatic payments on your boat loan.
Dealer financing
Getting a loan at a dealership can be convenient since it means finding your boat and your financing in one place. It can also mean getting access to special dealer incentives. On the other hand, it might be more costly, since dealers often add their own financing charges to the loan.
Marine brokers
According to the National Marine Lenders Association, marine brokers often help with used boat sales and larger boat sales.
If you decide to work with a buyer’s broker, the broker will represent you — not the seller. They’ll help you determine the right boat for your budget and needs, connect you with the seller and negotiate the sale. They do all of this for a commission, of course, which is commonly around 10%.
Other marine broker services may include connecting you with marine finance programs, determining the maintenance schedule of the new boat and holding deposits in escrow.
Shop around
Types of boat loans
Boat financing can be broken down even further into the different loan types that are available. Here are some of the most common types of boat loans and what they mean for you as a borrower:
Fixed rate vs. variable rate
You might have the choice of a fixed interest rate or a variable rate for your boat loan.
With a fixed rate, your APR will be locked in for the full duration of the loan, meaning it’ll never change. Many boat buyers choose fixed rates so they can have a set monthly payment amount and avoid future increases. Fixed rate is the most popular type of loan.
In contrast, a variable rate can change based on certain market conditions. While variable-rate loans are often more affordable in the beginning, the monthly payment could rise significantly if the rate increases down the line.
Secured loan vs. unsecured loan
A secured loan is a loan that requires the borrower to use property as collateral. If you fall behind on the loan, the lender can repossess your collateral — in this case, your boat.
Some boat lenders offer unsecured loans, meaning you won’t risk losing your boat if you fall behind on the loan payment. However, the downside is that unsecured loans can be more costly and harder to qualify for.
Alternatives to boat loans
If you’d rather not take on a boat loan or if you’re having trouble qualifying, there might be other ways to finance your boat purchase.
Home equity loans or lines of credit
Home equity loans and home equity lines of credit (HELs and HELOCs) often have competitive interest rates, since they’re secured by your home as collateral. You may be able to qualify for a home equity loan or HELOC if you have equity in your home (meaning the home is worth more than you owe on your mortgage) and your credit is in good condition.
Home equity loan rates are typically fixed, while HELOC rates may adjust after a set period (usually 10 years). With either option, you risk losing your house if you fall behind on payments, and you could also have to pay pricey closing costs and other fees.
Personal loans
Most lenders, including credit unions and banks, offer unsecured personal loans. The better your credit is, the more likely you are to be approved for personal loans by multiple lenders, with competitive rates. While the rates might not be as low as what you can get on a boat loan or home equity loan, you won’t risk losing your property if you fall behind on payments.
Pay cash
If you have the means, you can avoid paying interest and costly financing fees by buying your boat with cash. Paying with cash can help persuade a seller to accept your offer, and it also means that bad credit won’t be an issue. The downside, though, is that using cash might mean having to pass on a pricier boat if you don’t have enough money available.
Frequently asked questions
Like other types of loans, your ability to get a boat loan depends on your credit, debt and income. Some boat lenders will approve you for a loan with credit scores as low as 600, but the higher your scores, the more likely you are to be approved for better boat loan terms, including low interest rates.
There’s no set minimum credit score you need to finance a boat. However, you may be able to find multiple lenders who’ll approve you for a boat loan at competitive rates if your scores are 700 or higher.
Each lender has its own policy when it comes to which boats it will finance, but you may have trouble finding a loan for a boat that’s over 20 years old.