Chances are you already have an auto loan and maybe even a home loan. Well, boat financing isn't all that different. You simply borrow the amount you need to cover the purchase, choose a loan term to suit your budget, then start making monthly payments.
Our handy guide is here to explain everything you need to know about financing a boat purchase. Plus, you can use a boat loan calculator to work out your ideal monthly payment so you can enjoy life on the water.
What Is Boat Financing?
A boat loan gives you access to the money you need to buy the boat you want. Boat financing means you take out an installment loan from your local credit union or another financial institution to cover the purchase price as well as any fees and taxes.
Steps to Secure Boat Financing
To make sure you get a great deal and can comfortably afford your boat payments, follow these simple steps instead of rushing into your boat purchase:
- Do some research into the boat you want to buy so you have an idea of the amount you need to borrow.
- Save up for a down payment to reduce your borrowing costs, even if you're approved to borrow up to 100% of the purchase price.
- Explore which loan term may be best for your monthly budget but not cost too much in interest—you can likely choose between 12 and 60 months.
- Shop around a few lenders to find competitive, fixed rates, and flexible terms plus a fast application process and local approval.
- Get pre-approved for your boat loan so you find out what rate you'll likely get.
- Go shopping for a boat with your financing ready to go.
- Complete the purchase and start paying off your loan while enjoying your boat!
What Rate Will I Get for My Boat Loan?
The annual percentage rate (APR) you get for your boat loan will be based on your:
- Credit history: Higher credit scores get lower rates.
- Loan term: Shorter terms get lower rates and mean you pay less total interest.
- Loan-to-value (LTV) ratio: Larger down payments will reduce the amount you need to borrow relative to the purchase price.
What Boats Can I Buy With a Boat Loan?
You can buy a range of new and used boats with a boat loan, including fishing boats, wakeboard boats, and ski boats. (You should get a watercraft loan if you want to buy a jet ski or Waverunner.)
Consider Total Costs of Boat Ownership
When considering what boat to buy, you need to look at more than the purchase price. Don't forget to factor in the total cost of owning a boat, including ongoing expenses like:
- Slip fees
- Winterizing
- Towing and storage
- Fuel
- Boat Insurance
- Repairs and maintenance
- Registration and taxes
Consider a Marine Survey
If you're looking at buying a used boat, it's a good idea to order an inspection called a marine survey, just like you get a home inspection before you close on a mortgage.
During the marine survey, an inspector will:
- Examine the vessel, engine, and trailer
- Describe the boat’s condition
- Note any repairs you (or the seller) need to make
- Determine whether the boat is safe to take on the water
Qualifying and Applying for Boat Financing
Boats can be expensive so lenders may have tougher criteria when it comes to approving your boat financing. That's why you want to make sure you have all your ducks in a row (and paperwork ready to go!) before you apply for your loan.
How to Get Approved for Your Boat Loan
Take these steps to increase your chances of success:
- Find out your credit score and take steps to improve it so you get the best rate possible.
- Try to pay down your debt and boost your income to improve your debt-to-income (DTI) ratio.
- Aim for a down payment of at least 10% to reduce your loan-to-value (LTV) ratio.
- Show you have cash reserves to weather any financial ups and downs.
Documents Needed for a Boat Loan
If you have an auto loan, you'll know what documents you need to get boat financing:
- ID, proof of address, and Social Security number
- Proof of income, including pay stubs, W-2s, 1099s, and tax returns
- Information about your employer
- Information about the boat you want to buy
- Proof of insurance
- Evidence of your down payment
Alternatives to Boat Loans
A boat loan is secured by your vessel and this collateral means you'll likely get better rates than if you bought a boat with an unsecured personal loan.
It's not likely to make financial sense to pay for a boat with a credit card but you could potentially finance your purchase through a home equity loan or home equity line of credit (HELOC). These products offer competitive rates and flexible terms and can be useful for major purchases.
See Your Ideal Boat Payment
Now that you know all about how boat loans work, it's time to crunch a few numbers. Start by entering the estimated price of your ideal boat into a boat loan calculator. Next, find out what loan term gives you an affordable monthly payment, including interest.
