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Boat Loans: Fast Financing To Get You Out On The Water

Hanna Kielar6-Minute Read

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For many Americans, owning a boat is a dream. The possibilities with a boat can seem endless, whether you want to explore the open sea, take the family out for a ride or simply float leisurely out on the water. That dream can be expensive, though, and the price tags for most boats can put it further out of reach for some.

This is where boat loans come in.

Like auto loans and other types of loans, a boat loan can finance your watercraft purchase and allow you to pay it back over a period of time. The article below will tell you everything you need to know about boat loans, explaining the different types and guiding you through the application process.

Types Of Boat Loans And Financing

There’s no one route to go when getting a boat loan. Take a look below at some of the different ways you can finance your new watercraft.

Boat Dealer Financing

You can often work directly with a boat dealer to set up a financing plan that works for you. Many boat retailers may have an in-house finance specialist, or work directly with a third-party lender. Getting financing through your boat dealer could get you special deals because of their established relationships with finance companies and manufacturers. They may also have access to extended warranty programs that can be included in your loan.

Speak to your local retailer about their financing programs and see what kind of deals they can offer.

Personal Loan

You can use a personal loan for a number of purchases, one of which could be that boat you’ve been eyeing.

The funds from a personal loan are delivered to the borrower in a lump sum and can be paid back over a period of time through monthly payments. How long it takes to get a personal loan can depend on your lender, but typically you can expect to receive your funds within a week, or even just a few days.

Home Equity Loan

Another option for boat financing is a home equity loan, where your loan amount is determined by the equity you’ve built up in your home.

However, compared to a personal loan, there’s a little more risk involved with this loan. With a home equity loan, your home acts as collateral for the loan, meaning that if you can’t pay off your loan, your lender has the right to seize your property.

HELOC

Similar to a home equity loan, a home equity line of credit (HELOC) acts as a revolving line of credit that you can borrow from and then pay back, like a credit card. The amount of credit you can borrow from again depends on your home’s equity and value, and you still risk losing your home through foreclosure by putting it up as collateral.

How A Boat Loan Works

There are two major types of personal loans to consider when it comes to boat loans: secured and unsecured. Whichever one you choose can have major implications if you, for any reason, fail to pay back the loan.

Secured Loans

A secured loan is backed by collateral (such as the boat you plan to purchase) that can be seized or repossessed in the event you default on the loan.

Unsecured Loans

An unsecured loan, in contrast, is not backed by any assets. Your credit history alone assures your creditworthiness for the loan. As unsecured loans can mean a greater risk for a lender, borrowers may see a higher interest rate as a result. On the bright side, you won’t risk losing your boat or other assets in the event of a default, although your credit score may suffer.

Applying For A Boat Loan

Getting a personal loan can be a faster and easier process than other loans. Take a look below at some items to consider when applying for a boat loan.

Where To Look For Boat Loans

Your three main options for boat loan lenders are traditional banks, credit unions and online lenders. There are pros and cons to all three, and the method you use may depend on your situation and your needs. Let’s take a look at these:

Bank: The traditional brick-and-mortar route can be beneficial if you go through your current bank. Existing customers are often offered discounts or more favorable loan terms. However, borrowing from a bank will often require you to secure the loan with collateral.

Credit union: Credit unions are nonprofit institutions that can offer loans to those with lower credit scores. You must be a member of a credit union prior to applying for a loan, though, and your history with the institution can play a part in your approval. Loans from credit unions are also more likely to be secured ones.

Online lenders: Online lenders can typically approve and deliver funds faster than brick-and-mortar banks or credit unions, and can offer unsecured personal loans. They may also offer preapproval via a soft credit check – with no risk to your credit score – so you can see what rates and terms you qualify for ahead of time.

You also have the option to work with marine lending specialists, which are financial service companies that specialize in the boating business. Marine lenders act as brokers between the borrower and an outside financing source, like a bank. Boat loans from marine lending specialists have similar rates and terms as personal loans, with the added benefit of working with someone who understands boating. However, these loans are also secured by the boat and may require a down payment between 10 – 20% of the boat’s purchase price.

Required Credit Score

A higher credit score will offer you better rates and terms for your loan, but the minimum accepted credit score for a personal loan is typically 650. A lower score may be accepted, though, for longtime customers of a traditional bank or credit union.

If your score isn’t as high as you’d like it to be, consider taking some time to build up your credit to get the best possible loan terms and buy the best possible boat.

Typical Boat Loan Terms

Personal loan terms typically last 12 – 60 months, and the general rule of thumb is that the longer the term, the higher the overall cost of the loan will be. For a cost-effective approach, only borrow as much as you need for your purchase and what you could realistically pay back in a shorter amount of time.

Average Boat Loan Interest Rates

Your interest rate will be determined by your credit score, history and debt-to-income ratio (DTI). Current interest rates for personal loans can float between 6% and 36%, depending on your lender. If you have a fixed-rate plan, your monthly payments will always be the same amount, regardless of whether rates go up.

What To Consider When Buying A Boat

Just as owning a car comes with additional costs, the same can be true for watercraft vehicles. In addition to your monthly payments for your boat loan, you should budget accordingly for ongoing costs like fuel, storage, insurance, licenses, registration, repairs and maintenance. If you’re not buying a new boat, you may need to pay for an inspection, or a marine survey, to determine if the boat is safe to take out on the water.

Alternatives To Taking Out A Boat Loan

If for whatever reason a boat loan wouldn’t work for you, you’re not out of luck yet. If you haven’t already, consider some of these financing options.

Use A Credit Card

Some credit cards offer a 0% APR introductory period that can last for 12 – 18 months, depending on the lender, in which you can repay what you borrowed completely interest-free. You should only consider using a credit card if you’re confident you can pay off the entire amount within that promotional period, though, as credit cards have much higher interest rates than personal loans, and you could wind up even further in debt once those start to kick in.

Save Up For A Purchase

It’s no fun to take from your savings, but if you can afford it, it can be an immediate way to present the cash needed for your boat purchase. Though we’d hardly consider buying a boat an emergency, you could also draw from your emergency fund if you have one.

Final Thoughts

Buying a boat can be an expensive dream, but not an impossible one. There are several financing options available to you, depending on your financial situation and preferences. Personal loans tend to be the most common because they can get you your money quickly, have a straightforward and simple application process and can offer unsecured loans with no collateral. If that all sounds ideal to you, then a personal loan may be the way to go.

Still unsure? Learn more about how to decide whether you should get a personal loan in general.

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Hanna Kielar

Hanna Kielar is an Associate Section Editor for Rocket Mortgage focused on personal finance, recruiting and personal loans. She has a B.A. in Professional Writing from Michigan State University.