Updated
May 30, 2023 If you’re in the market for a boat, you might look forward to long days on the water and trips with friends. But you need to figure out the financing first. With an average price tag of around $40,000, the cost of a new boat is on par with a new car. But boat financing can be more challenging than getting an auto loan.
Unless you can pay cash for a boat, you need financing. Loans are often the best option, and you have plenty to choose from—secured and unsecured loans. Plus, you can choose from several types of lenders. Our research lets you find the best fit for your finances and lifestyle. Here’s everything you need to know about boat loans and how to find the best.
In this guide:
- How do boat loans work?
- Best boat loan lenders
- What to ask before financing a boat
- How to apply for a personal boat loan
- Alternatives to boat loans
- FAQ
How do boat loans work?
The two general types of boat loans are secured and unsecured. Regardless of the loan’s name, it falls into one of those two categories.
With a secured loan, you must provide collateral to guarantee the loan. In this case, the boat is collateral. If you default on the loan, the lender can take possession of the collateral to collect payment. An unsecured loan is not guaranteed with collateral.
Here are the primary differences between the two loan types.
| Unsecured loan | Secured loan | |
| Collateral | Not guaranteed by an asset | Guaranteed by an asset |
| Interest rates | Often higher | Often lower |
| Loan amount | Often lower | Often higher |
| Approval | Might have stricter lending requirements | Might have more lenient lending requirements |
| Repayment term | Often shorter | Often longer |
Secured boat loan
Secured loans require collateral, which means you use an asset to guarantee the loan. Common secured loans are auto loans with cars as collateral and mortgages with houses as collateral. With a boat loan, the boat is collateral.
The loan is secured with collateral, so it’s less risky for the lender. You might qualify for a better interest rate or more favorable repayment terms. Secured loans might be more common for expensive boats with more considerable risk to lenders.
As with most financial products, we recommend considering the pros and cons.
Pros
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Lower interest rate:
Because the loan is guaranteed by an asset, which makes it less risky for the lender, you might be able to secure a lower interest rate.
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Easier to qualify:
You might find it’s easier to qualify for a secured boat loan because the loan is guaranteed. Consider a secured loan if you’re concerned about qualifying or want the most competitive rate.
Cons
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The collateral is at risk:
If you default on the loan, the collateral—your boat—is at stake.
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Down payments may be necessary:
Certain lenders require you to make a down payment to reduce the total loan amount. The primary purpose is to ensure you don’t owe more than the boat is worth.
Unsecured boat loan
Unsecured loans don’t require collateral. You can get personal loans for any purpose, including buying a vehicle. Some lenders advertise specific boat loans. But you can use any unsecured personal loan to purchase a boat.
An asset doesn’t guarantee the loan, so interest rates might be higher. But the loans are versatile, and you can use part of the money to purchase a boat and the rest for related expenses. With a secured loan, you can only use the money to buy the object.
Here are several pros and cons of unsecured boat loans.
Pros
-
Get funds faster:
The application process for an unsecured loan is quick, especially with an online lender. You might receive the funds more quickly than you would with other types of financing.
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Flexible loan terms:
Various personal loan lenders often mean you can find repayment terms to suit your needs. Plus, you might be able to get a smaller loan, which can be helpful if you’re in the market for a used boat.
Cons
-
Stricter lending requirements:
Unsecured loans don’t require collateral to mitigate the risk for the lender. The lender might have more stringent lending requirements to offset the risk.
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Higher interest rate:
The interest rates for unsecured loans may be higher than the ones you can find for secured loans because they’re riskier for the lender.
Best boat loan lenders
You can find boat loans from online lenders, banks, boat manufacturers, or marine lending specialists. These are several of the best lenders for secured and unsecured loans based on credit score.
Unsecured boat loans
Best for excellent credit: LightStream
Editorial rating: 4.8 out of 5
- Rate Beat Program to beat competitor’s offer by 0.10 percentage points
- Loan amounts: $5,000 – $100,000
- Loan terms: 24 – 144 months, depending on loan type
LightStream offers among the most competitive interest rates available. You may need excellent credit to qualify for the lowest rates. But if you can secure a low rate with LightStream, it’s a solid option for boat financing.
This online lender offers specific unsecured boat financing loans with rates starting at 7.49% for excellent credit. You don’t need to provide collateral.
LightStream caters to customers with excellent credit, and the perks—no fees and same-day funding—are worth a look. But be aware of the hard pull on your credit to view preapproval rates and terms.
- Credit score category: Good to excellent
- Soft credit pull to check rates? No, but you can view rate projections online
- Deposit time: Same-day funding is available
- Origination fee: $0
- Late fee: None
- Rates (APR): 7.49% – 25.99%
- Repayment terms: 24 – 144 months, depending on loan type
Best for good credit: SoFi
Editorial rating: 5 out of 5
- Unemployment protection allows eligible borrowers who lose their job to pause loan payments for up to 12 months
- Loan amounts: $5,000 – $100,000
- Loan terms: 24 – 84 months
SoFi is a reputable online lender that caters to customers with good to excellent credit. The application process is easy to understand. Select the loan you want, gather the necessary information, and apply. The company offers outstanding customer service via phone and email if you have any questions throughout the process.
Loan amounts start at $5,000 and go up to $100,000. For boat financing, you’ll apply for an unsecured personal loan. There are no fees required, and same-day funding is available. That might not mean you’ll get the funds on the day you apply—loans can require additional processing time—but it’s fast.
Plus, you’ll get automatic unemployment protection in the event of job loss. That’s a definite perk most other lenders don’t offer.
- Credit score category: Good to excellent
- Soft credit pull to check rates? Yes
- Deposit time: Same-day funding is available
- Origination fee: 0% to 6%
- Late fee: None
- Rates (APR): 8.99% – 23.43%
- Repayment terms: 24 – 84 months
Best for fair credit: Upgrade
Editorial rating: 4.9 out of 5
- Credit Health feature provides personalized recommendations to help borrowers improve credit scores and overall financial well-being
- Loan amounts: $1,000 – %50,000
- Loan terms: 24 – 84 months
Upgrade is a solid option for borrowers with fair credit who want an unsecured boat loan. You can check your rates without harming your credit score, making it easy to compare offers from various lenders and find the best deal. But what differentiates Upgrade is loan eligibility based more on multiple factors.
Upgrade’s loans include an origination fee of 1.85% to 9.99%, which can add up. For example, you would pay between $555 and $2,997 in expenses for a $30,000 loan. That’s not a deal breaker, but it’s something to be aware of as you consider the best lender.
- Credit score category: Fair
- Soft credit pull to check rates? Yes
- Deposit time: Same-day funding is available
- Origination fee: 1.85% – 9.99%
- Late fee: $10 per late payment
- Rates (APR): 8.49% – 35.97%
- Repayment terms: 24 – 84 months
Best secured boat loan: Best Egg
Editorial rating: 4.8 out of 5
- Use personal assets as collateral to secure the loan and potentially get a lower interest rate
- Loan amounts: Up to $50,000
- Loan terms: 36 or 60 months
Best Egg offers unique secured loans for homeowners. To qualify, you must own a home because your house is collateral. You might use the loan to buy a boat, but the boat doesn’t act as collateral. Instead, the fixtures in your home guarantee the loan. Fixtures might include built-in cabinets or lights.
Most home equity loans or lines of credit require borrowers to use their house as collateral. But Best Egg only requires borrowers to use fixtures in their houses, so the loan amounts are smaller than most home equity loans, with a maximum amount of $50,000.
If you’re a homeowner comfortable using part of your house as collateral, Best Egg’s secured loan could be suitable for boat financing.
- Credit score category: Good to excellent
- Soft credit pull to check rates? Yes
- Loan amounts: $2,000 – $50,000
- Deposit time: Less than 24 hours
- Origination fee: 0.99% – 8.99%
- Late fee: Varies
- Rates (APR): 5.99% – 29.99%
- Repayment terms: 36 or 60 months
Best boat loan from a brick-and-mortar bank: PNC
Editorial rating: 4.6 out of 5
- Offers a range of rate discounts, including loyalty and co-applicant discounts
- Loan amounts: $1,000 – $20,000
- Loan terms: 6 – 60 months
PNC is a solid option for boat loans from a bank with traditional locations instead of an online-only presence. Depending on where you live, you might have access to an unsecured or secured personal loan. There are no origination fees or prepayment penalties if you pay off your loan early.
You can check your loan offers with a preapproval application that won’t harm your credit score. If you’re partial to brick-and-mortar locations and feel more comfortable with a loan from a traditional bank, PNC might be a terrific fit.
- Credit score category: Good
- Soft credit pull to check rates? Yes
- Loan amounts: $1,000 – $20,000
- Deposit time: Same-day funding is available
- Origination fee: $0
- Late fee: Varies
- Rates (APR): Not disclosed
- Repayment terms: 6 – 60 months
Best boat loan for veterans and military members: Navy Federal Credit Union
Editorial rating: 4.6 out of 5
- Provides financial education resources and a mobile app for account management
- Loan amounts: $250 – $50,000
- Loan terms: Up to 60 months
Navy Federal Credit Union offers unsecured personal loans you can use for any large purchase, including a boat. You must be a member to apply for a loan, and membership is based on military affiliation. You must be a military service member, veteran, or immediate family member. If you meet the eligibility requirements, the membership process is simple.
Navy Federal’s loans offer solid interest rates; even the highest rate of 18% is competitive. The repayment terms go up to 60 months, which provides additional flexibility, and loan amounts can be as low as $250.
- Credit score category: Good
- Soft credit pull to check rates? Yes
- Loan amounts: $250 – $50,000
- Deposit time: 1 – 2 business days
- Origination fee: Yes
- Late fee: Varies
- Rates (APR): 7.49% – 18%
- Repayment terms: Up to 60 months
Marine financing specialists
If you’re buying a boat from a manufacturer or retailer, it’s worth asking about lending partners. Some lenders focus on boat financing. A boat is a unique purchase for most people, so working with an experienced lender who knows the ins and outs of the industry can be helpful.
But like most lenders, the rates will vary depending on your credit score and other factors. In general, you can expect rates comparable to online lenders or traditional banks. Getting two or three quotes from different lenders, including a marine financing specialist, is wise. Once you have the quotes, you can compare interest rates, loan terms, and fees to find the best fit.
What to ask before financing a boat
Ask yourself these essential questions before you take the plunge to finance a boat.
Does buying a boat make sense with my current budget?
Boats are not a necessary expense, so consider whether boat financing fits in your monthly budget. Be sure to consider the monthly loan payment, including additional fees. Check out our boat loan calculator if you aren’t sure where to start.
Once you know an estimate for the cost, try saving that amount each month before getting a loan. For example, if you expect your loan payment to be around $500 each month, set aside that amount for three to six months in a separate savings account before you make the purchase.
This strategy allows you to understand how it feels to have the extra expense and whether you can afford it. Plus, you can use the money you save as an additional down payment when you get the loan.
Can I afford all the costs of owning a boat?
The cost of a boat is only one part of being a boat owner. The expenses associated with ownership can vary depending on the boat’s size, location, and how you plan to use it. But consider the following costs, and prepare accordingly.
- Insurance: The cost varies, but you can expect to spend $200 to $500 a year, or up to 5% of the boat’s value for expensive vessels.
- Fuel: On average, you can expect to pay about $300 in fuel costs per boat trip. The costs can add up depending on how often you use your boat.
- Docking or marine fees: On average, renting a boat slip costs between $800 and $1,800 yearly. Prices can vary depending on your needs, but unless you own a dock, expect to pay an annual or monthly fee.
- Boat maintenance: Boat maintenance costs depend on your boat’s size, condition, and age. But on average, you can expect to pay about $4,000 per year.
Consider these ongoing expenses as you determine whether you can afford to own a boat, especially if you need a loan to purchase one.
Is my credit good enough to take out a loan?
Your credit score affects your loan terms and interest rate. It’s wise to know your credit score before you research lenders. Certain lenders cater to different credit score categories, so you can find the best fit once you know your score.
Here’s a breakdown of the credit score categories:
- Excellent credit: 740 to 850
- Good credit: 670 to 739
- Fair credit: 580 to 669
- Bad credit: 300 to 559
If you’re concerned about your credit score and whether you’ll qualify for a loan, focus on lenders that work with borrowers in your range. Not every lender allows it, but you could consider a qualified cosigner and get preapproved with lenders that do.
How to apply for a personal boat loan
Once you’re ready to start the loan process, begin with these steps.
- Find the best lender: Research lenders, and find the best fit based on your credit score and loan requirements. Try to narrow it down to two or three lenders.
- Get preapproved: Once you’ve narrowed your list, it’s time to get preapproved. Most lenders have a preapproval process that allows you to view loan rates and terms without affecting your credit score.
- Compare offers: Compare the lenders’ offers to find the best fit.
- Complete the application: Once you select your lender, complete the application and sign the documents.
- Get the funds: After completing the paperwork, you’ll receive the funds.
Alternatives to boat loans
You might consider using cash, financing through your boat dealer, or joining a boat club instead of financing.
Boat clubs
You might be interested in a boat club if you want access to boats without buying one. Boat clubs are membership-based clubs located around the world. The clubs charge monthly membership fees. In exchange, members can borrow vessels throughout the month. The average cost is between $300 and $1,000 per month. It’s a solid option if you want a boat without the hassle of ownership.
Pay cash
If you have the money, consider paying for your boat in cash. Cash might be an option if you have a sudden windfall from an inheritance, annual bonus, or severance package. It’s wise to ensure other aspects of your finances, such as retirement, are squared away before taking the plunge.
Boat rentals
You might consider boat rentals if you love boats but don’t want to deal with the ongoing expenses of ownership or boat club memberships. You can rent boats from boat rental companies or boat owners. Depending on how often you rent, you could save tens of thousands of dollars compared to ownership.
FAQ
What is the best boat financing option?
The best boat financing option depends on your needs and credit score. The most popular options are secured and unsecured loans, but it’s essential to consider your budget, the loan terms, and potential fees as you decide.
What are typical boat loan rates?
Unsecured personal loans are one of the most popular financing options for boats. The interest rates for those loans vary depending on the lender and your credit score but often range from 7% and 30% in April 2023.
Which lenders and loan types offer the best boat loan rates?
The best option depends on your credit score and creditworthiness. If you have excellent credit, you’ll have more options for financing. But even if you have fair or thin credit, you can find a lender that meets your needs. You might consider secured and unsecured personal loans from online lenders, credit unions, and banks.
Can I get a used boat loan?
If you decide to use a personal loan to finance your boat, you can use the funds for almost anything, including a used boat. You might be limited in how to use the funds if you opt for other types of loans, especially loans exclusive to boat purchases.