Boat Loans and Financing Options

Buying a boat is a dream for many water-lovers, whether for sport or pleasure. However, a boat can be a significant purchase that is not easily covered with cash on hand. The purchase price range of a new motor boat is between $20,000 and several hundred thousand dollars, while a pontoon boat averages around $35,000. 

For most boat enthusiasts, this is not something they can pay for out of pocket. That’s where boat financing and boat loans come in to lend a helping hand.

On this page:

• Type of Boat Loans
• Where to Get a Boat Loan
• Application Process & Interest Rates
• Boat Loan Terms
• Alternative Ways to Finance a Boat

Types of Boat Loans

Boat loans are specifically designed to cover the cost of a new or used boat for a qualified borrower. Some lenders offer loans for boats, with special terms and rates, while others do not offer this type of financing, even if the borrower is qualified. 

Like other types of financing, boat loans may be available with a wide range of interest rates, repayment terms, down payment requirements, and other up-front or built-in costs. It is necessary to understand your options before purchasing a boat.

Types of boat loans may include the following:

• Fixed interest rate boat loans with a set interest rate and repayment amount over the life of the loan
• Variable interest rate boat loans with a fluctuating interest rate and fluctuating payment over the life of the loan
• Balloon payment boat loans with a smaller monthly payment due for the majority of the loan term and then a large, lump sum payment at the end
• Personal loans for boat purchases that do not require the boat to be used as collateral to back the loan
• Home equity that uses a borrower’s personal residence as collateral instead of the boat itself, with either variable or fixed interest rates

In addition to these traditional options for financing a new or used boat purchase, there may be specialized boat loans that combine one or more of the features listed above for qualified borrowers.

Any type of boat may be financed, so long as the prospective boat owner qualifies for the new loan. Lenders may have specific requirements for minimum and maximum loan amounts for boat purchases, as well as specific terms for how long repayment can extend. However, just about any boat purchase, including speedboats, yachts, pontoon boats, and water sport vehicles, can be financed. 

Borrowers should note that boat loan lenders may differentiate between used boats and new boats, similar to how auto loans are priced. Because used boats represent more of a risk, loan terms may include a higher interest rate, a shorter repayment term, or a combination of the two. Typically, new boat purchases have the best available loan terms.

Where to Get a Boat Loan

Even though there are many financing options, there are only a few places you can secure a boat loan. Traditional banks and credit unions may offer specific financing offers for boat purchases, as will some online lenders. 

Dealer Financing

You may qualify for financing directly through the boat dealership or a specialized financial services company that works with boat owners. Just be sure to read reviews from others who have received financing from the company before signing on the dotted line.

LightStream

Learn More

Rates (APR)

4.29% – 10.84%

Loan Amounts

$5,000 – $100,000

Loan Terms

24 – 84 months

LightStream is one prominent boat finance company, operating as a division of SunTrust Bank. Through a LightStream boat loan, borrowers can buy or refinance a boat so long as they have good credit and steady income. 

Essex Credit

Boat loans are also available from Essex Credit, a subsidiary of Bank of the West. The lender offers boat financing to borrowers who are purchasing a boat no older than 1998, new or used, with competitive rates and repayment terms.

Application Process & Interest Rates

Like other loans, applications require you to meet certain eligibility guidelines in order to qualify. Whether or not you are approved for a loan, as well as the interest rate and offered repayment terms, are dependent on the following factors:

• Creditworthiness – if you have less than perfect credit and a lower credit score, with issues like bankruptcy, foreclosure, or late payments on debts, you may find it difficult to qualify for an affordable boat loan and your rates may be extremely high. 
• Debt-to-income ratio – the amount of debt you owe compared to the income you earn is a factor in your ability to qualify. Because a boat loan is a significant purchase in many cases, you need to have a low debt-to-income ratio and relatively high income.
• Down payment – a boat lender may also require you to bring a down payment to the table to qualify for a loan. The higher the down payment, the lower your monthly payment will be since the lender is at less risk for the duration of the loan. However, down payments do not always move the needle significantly on a boat loan, so be sure to crunch the numbers with your potential lender.

In addition to these qualification requirements, you will also need to provide information that verifies the purchase price of the new or used boat you plan to buy, your income, and in some cases, bank statements that show assets on hand. Lenders look at these details to determine your financial strength and ability to repay.

Boat Loan Terms

Boat financing terms vary from lender to lender. This means your loan may have a fixed rate or a variable interest rate, fixed repayment schedule, balloon payment requirement, or origination or funding fees added to the loan amount. Because most boat loan lenders require you to use your boat as collateral, your annual percentage rate on a boat loan may be lower than alternative forms of financing. 

For instance, LightStream interest rates range from 4.29% up to 10.84% for fixed term loans for a boat. Repayment may be extended up to 84 months, depending on the amount financed. The maximum loan amount available is $100,000.

Similarly, Essex Credit offers boat loans with interest rates as low as 5.19% and repayment terms up to 20 years depending on the loan amount. Essex Credit differs from LightStream in that borrowers may finance up to $2 million for a new boat purchase. 

Using a boat loan calculator can help you see how much financing you’ll need, and what your payments might look like in different scenarios. 

Alternative Ways to Finance a Boat

Boat loans from specific lenders are not the only strategy for paying for a new or used boat purchase. You may also look at your options to finance with the help of a personal loan or a home equity solution if you can get credit approval and competitive rates. 

Home Equity

A home equity loan or home equity line of credit is available to homeowners who have available equity in their primary residence. This is the difference between the balance left on a mortgage and the market value of the home. If equity is available, a home equity loan or line of credit can be used for just about any major purchase, including a boat. 

Home equity loans often have fixed interest rates that are lower than financing alternatives, while home equity lines of credit have variable rates that fluctuate over time. While home equity may be available as a way to finance a boat, homeowners are effectively using their home as collateral for the boat.

Personal Loan

You may use a personal loan for a boat purchase. This differs from a traditional boat loan in that you do not need to pledge collateral to qualify for the loan. Instead, your credit history works as your qualification for financing. 

Because there is no collateral involved, personal loan interest rates are often higher than boat loans or home equity loans. Additionally, personal loan lenders have much lower loan maximums.

>> Read More: Compare the Best Personal Loans

Bottom Line

Potential boat owners have several ways to finance a boat purchase, whether it is new or used or a specific type of water vehicle. It is essential to shop around for the right boat financing before signing on the dotted line, ensuring that the boat loan you choose is the best fit for your personal financial circumstances.