The Ultimate Guide to Boat Financing in 2024


Dreaming of long days spent fishing, sunbathing, and generally enjoying the magic of the wide-open water?

people jumping off a boat

Boat ownership could be the key to unlocking your seafaring dreams. But for most of us, slapping down tens, or possibly hundreds of thousands of dollars on the vessel of our dreams is simply not in the cards.

Fortunately, financing a boat can help you get your hands on the boat of your dreams without having to wait until you can afford it outright. But how do you get a boat loan, and who offers them? What kind of boat loan requirements and credit approval can you expect? And what do you do if you don’t have excellent credit?

Read on to learn everything you need to know to get sailing as soon as possible—without spending a fortune.

Selecting the Right Boat Loan: An Overview of Options

When it comes to financing a new or used boat, understanding your loan options is the first step. While auto loans are commonly advertised and widely available, boat loans tend to be a bit more specialized. However, there’s no shortage of financing options for prospective boat owners. Let’s dive into the most common types of boat loans and what makes each unique.

Secured Loans

Secured loans are a familiar concept to anyone who’s financed a car. Many boat dealerships offer secured loans, where the boat itself serves as collateral. This means if payments are not kept up, the lender has the right to repossess the boat.

Secured loans often come with competitive interest rates, reflecting the lower risk to the lender due to the collateral. They can be a great option if you’re looking for lower monthly payments and have a boat in mind that qualifies as collateral.

Home Equity Loans

Leveraging your home’s equity can be a smart way to finance a boat purchase. Home equity loans use the value you’ve built up in your home to secure the loan, which can often result in lower interest rates compared to unsecured loans.

Additionally, the interest paid on these loans is sometimes tax-deductible. This option is worth considering if you have significant equity in your home and are comfortable with the idea of using your home as collateral.

Unsecured Loans

Unsecured personal loans offer flexibility in what you can finance, making them a viable option for boat purchases without requiring collateral. This flexibility comes at a cost, however, with higher interest rates than secured or home equity loans due to the increased risk for the lender. If you have a strong credit score and prefer not to put up collateral, an unsecured loan could be the right choice for your boat financing needs.

Credit Cards

Credit cards offer a quick and flexible financing option, with the potential for rewards or cash back on your purchase. Despite this, the high APRs that typically accompany credit card debt make it a costly long-term financing solution. For those with access to 0% APR introductory offers, credit cards can serve as an effective short-term financing tool, provided you can pay off the balance before the promotional period expires. This strategy requires careful planning to avoid significant interest charges.

Where to Apply for a Boat Loan

Now that we’ve gone over which types of loans you can use for purchasing a boat, let’s talk about where to get a boat loan.

Boat Dealers

Boat dealers may directly offer boat loans, just as you’d expect to find in-house auto loans available at certain car dealerships. These are typically collateral loans and may come with additional incentives, such as manufacturer deals and warranties.

For example, Yamaha boat financing currently offers $0 down and 0 payments for 90 days. The APR is 2.99%. It’s wise to shop around and compare boat loan interest rates before you make a final decision.

Banks and Credit Unions

In addition to boat-specific loans, banks, credit unions, and other financial institutions may offer personal loans (unsecured) and home equity lines of credit. A bank or credit union may have a better interest rate than the ones you’d find at the dealership. This could save you money, even after you factor in those special “deals” the boat seller has to offer.

Peer-to-Peer Lenders

P2P lenders like Prosper, Lending Club, and other online lenders can help you secure a personal loan directly from a private individual. This might help you find a better deal than you would at a traditional financial institution.

What You Need to Qualify for a Boat Loan

To qualify for a boat loan, you’ll need to meet certain qualifications. Prequalification is a great way to get an idea of whether you’re likely to be approved for a loan. It allows you to submit basic information to a lender before formally applying.

To be approved, lenders will need to see that you meet their requirements and have the necessary documentation to prove it. The most common requirements for boat loan applications are: a good credit score, consistent income, and proof of sufficient collateral. Taking these steps will help you determine if you are prepared to apply for a loan and increase your chances of getting approved.

Proof of Citizenship or Residency

Most lenders in the U.S. require proof of your citizenship or legal residency to qualify for a loan. You can provide this verification with one of the following documents: birth certificate, certificate of citizenship, driver’s license, military ID, passport, Social Security card, or state-issued ID. Make sure to have these documents available when applying for a loan.

Bank Account

Having a bank account is essential if you’re looking to apply for a loan. Your bank account and bank statement provide lenders with a way to verify your income. Plus, if approved for a loan, lenders can quickly transfer funds into your bank account.

While it is possible to get a loan without a bank account, it’s not always an easy task. So if you’re looking to take out a loan, having a bank account with a reliable financial institution is a must.

Employment History & Income

When applying for a boat loan, lenders will typically want to see steady and reliable employment. Having a consistent work history demonstrates that you are capable of making payments on your loan.

When verifying employment and income, lenders may require certain documentation. This typically includes your tax returns, bank statements, pay stubs, and other income sources such as government benefits, child support, and alimony.

To qualify for a loan, you need to show that you have consistent and sufficient income to cover the loan payments.

Down Payment

You should also know that just about any boat loan will require a substantial down payment. So, you’ll need to come up with about 10-25% of the boat’s total cost out of pocket to initiate the sale.

You don’t want to drain your entire savings account on what ultimately amounts to a frivolous purchase, no matter how tempting it may be. It’s smart to look closely at your budget to determine how much boat you can afford and save up your down payment well ahead of time.

Good Credit Score

As with any financing, when you’re shopping for boat loans, you should know that your credit scores can have a serious impact on your overall loan terms. It will also impact how much you’ll end up paying for your new boat altogether.

While many marine lenders may extend boat loans to those with poor or nonexistent credit history, these loans may come with high interest rates. That will likely further complicate your financial situation.

Marine Survey Report

When securing financing for a boat, lenders want to ensure they know the vessel’s value. To do this, they often require a marine survey report, which assesses the boat’s worth much like an appraisal report gives the value of a home. A marine survey report can provide lenders with the information they need to make an informed decision about granting a boat loan.

Boat Financing with Bad Credit

If you’re already in debt or struggling with a lower credit score, your best option might be to repair your credit before submitting a loan application. Fortunately, we’ve got tons of tips and tricks to help you get out of debt as quickly as possible and improve your credit score.

These tips can help you get a boat loan with a much better loan term. Here are a few simple steps to take to get you started on the road to better credit.

  • Pay each of your credit accounts on time: You should at least pay the minimum monthly payment amount. If you can afford to pay more than the minimum, always pay toward the principal loan amount if your lender gives you the option. This will decrease the total amount of interest you pay over the course of the boat loan.
  • Avoid closing any existing lines of credit: However, don’t try to open a host of new ones at the same time, either. The total length of your credit history plays an important part in how FICO calculates your credit scores. Keeping old accounts open can be helpful even if you’re no longer using them.
  • Have a mix of credit types: However, there’s no need to open several new accounts at once. This can create multiple hard credit inquiries that can read as a red flag to bureaus. So, don’t go crazy trying to establish multiple new accounts at once.
  • Pay off your debts before taking out any new loans: Regardless of your credit score, revolving debt is costly and acts as a weighty financial anchor. You’ll enjoy your new purchase much more once you’re able to afford it without worrying about how to make ends meet!

Essential Tips for First-Time Boat Buyers

Purchasing your first boat is an exciting step towards adventures on the water, whether it’s for fishing, cruising, or watersports. To ensure a positive experience from start to finish, here’s some targeted advice and a straightforward checklist for first-time boat buyers. This guidance aims to streamline the process and help you avoid common pitfalls.

Identify Your Boating Preferences

The first step is to clearly define how you plan to use your boat. Different types cater to different activities, such as leisure cruising, fishing, or sailing. Knowing your preferred activities will help you narrow down the options to find the perfect boat for your needs.

Establish a Comprehensive Budget

Remember, the cost of owning a boat extends beyond the initial purchase. Maintenance, storage, insurance, and operational expenses such as fuel should all be considered when setting your budget. This foresight helps prevent unexpected financial pressures later on.

Research Thoroughly

Dedicate time to researching various boat types, brands, and models. Utilize online resources, attend boat shows, and read boating magazines to gather information. This step is vital for understanding the features, quality, and pricing of different boats.

Conduct Detailed Inspections

For a new boat, look for any signs of damage or defects. If you’re considering a used boat, having a professional marine surveyor inspect the boat is highly recommended. They can evaluate the boat’s structural and mechanical condition, helping you avoid costly repairs.

Experience the Boat Firsthand

Taking the boat for a test drive is crucial. This experience allows you to assess its performance, handling, and comfort level, ensuring it meets your expectations before making a commitment.

Understand Legal and Safety Requirements

Make sure you’re aware of the legal requirements for boat ownership in your region, including necessary registrations, boating licenses, and safety equipment mandates. Adhering to these rules is essential for a safe and lawful boating experience.

Steer Clear of Common Mistakes

Many first-time buyers overlook the importance of comprehensive research and trials, leading to choices based on appearance rather than functionality and cost-effectiveness. Additionally, underestimating the total cost of ownership or choosing a boat that’s too challenging to handle can sour your boating experience.

Final Thoughts

Getting a boat loan is similar to financing a car (or any other object or project). It can be an effective way to get a boat today, even if you don’t have the money to pay for it in full immediately. However, shopping around to secure the best rates and repayment terms is an important step toward ensuring that your new toy doesn’t put you into a financial tailspin.

For more information on shopping for personal loans, check out our series of loan reviews, including the best personal online loans and the best personal loans for bad credit.

Frequently Asked Questions

Is it hard to get a boat loan?

It depends on factors such as your credit score, income, debt-to-income ratio, and the type of boat you are looking to finance. Generally, it’s not too difficult to get a boat loan, though interest rates may be higher than for other types of loans.

How much can I borrow for a boat loan?

The amount you can borrow for a boat loan will depend on your credit score, income, and the value of the boat you are purchasing. In general, unsecured boat loans can be up to $100,000, while secured boat loans can exceed $1 million.

What are the typical terms of a boat loan?

Boat loans typically have loan terms ranging from 5 to 20 years. A down payment of 10-25% of the purchase price is usually required, although some boat loan lenders may offer loans with lower down payments.

Prepayment penalties and late payment fees may be assessed by the lender, and a boat survey may be required to make sure the vessel is in good condition and suitable for safe use.

Boat loan repayment terms depend on various factors, such as whether the boat is new, used, or being refinanced. Other factors include its age, the amount of money being borrowed, and how the boat is being used (e.g., full-time or part-time).

Can I get a loan for a used boat?

Yes, it’s possible to get a used boat loan. However, the terms and rates may differ from those for a new boat.

Lenders may consider the age and usage of a used boat when determining the rate and loan term for a secured boat loan. An unsecured loan, on the other hand, does not usually take those factors into account.

What credit score do I need for a boat loan?

Having a credit score of 700 or higher is generally a requirement for obtaining a boat loan. Getting a secured or unsecured boat loan with a lower credit score may be possible. However, it is likely to come with a higher interest rate or a larger down-payment.

How long does it take to get a boat loan?

The length of time it takes to get a boat loan can vary, depending on the lender and the type of loan you are applying for. The process of applying and getting approved for a boat loan typically takes anywhere from a few days to a few weeks.

Jamie Cattanach
Meet the author

Jamie Cattanach is a freelance writer whose work has been featured at Fodor's, Yahoo, SELF, The Motley Fool, Roads & Kingdoms, and other outlets.