Is Financing A Boat A Bad Idea
As a general rule of thumb, you should ensure that any purchase you finance will be paid down faster than it depreciates. If the purchase’s value decreases at a faster rate than your loan balance, you run the risk of going “upside down” on the loan, or dealing with negative equity.
While this is most often talked about in terms of new cars, it’s also a concern with watercraft, especially since boats are quickly depreciating assets.
Negative equity can be a serious concern with a high-value investment such as a boat. If the boat were to be stolen, totaled, etc., you would be on the hook for the difference between the remaining loan balance and the insurance company’s valuation/payout. Negative equity can also come back to bite you if you ever want to trade in the boat or sell it, as you’ll wind up owing your lender out-of-pocket in order to finalize the transaction.
Lastly, it’s important to recognize that financing a purchase will cost you more than the sticker price, no matter how competitive the interest rate you obtain. Between loan processing fees and finance charges, the added expense can be significant.
While financing a boat is not a bad idea in and of itself, it’s important to strike a balance between your purchase price, down payment amount, and loan repayment terms. This will help maintain a healthy loan-to-value ratio and ensure that you don’t pay significantly more for your purchase over time than if you’d paid in cash.
How Does Boat Financing Work
Boat financing can usually be one of the following:
- A secured loan that is designed to specifically finance a boat.
- A more general secured personal loan that allows boats to be used as collateral.
- An unsecured personal loan with no collateral.
Boats can be expensive, so you will find these loans offer larger loan amounts and may give you longer repayment terms than loans used for other purposes. If youre looking for a competitive interest rate, you may want to consider using the boat as security for the loan.
Boat Loan Frequently Asked Questions
What are the average terms for a boat loan?
While the terms for boat financing can range from 12 months to 15 years, the average boat loan is between 2 15 years.
Can I get a loan for a used boat?
Yes, Seacoast Bank offers loans for new and used boats.
How much can I afford?
Use our Boat Loan Calculator to estimate your monthly loan payments.
How much of a down payment do I need for a boat?
Seacoast Bank offers financing for up to 80% of the Boat cost meaning you will need to put down 20% of the purchase cost as your down payment.
Can I prequalify for a boat loan?
Yes, if you are still shopping for your boat, getting prequalified helps strengthen your negotiating position by positioning you as a cash buyer to the seller. A preapproval is an offer to lend but not a commitment to lend. Its valid for 90 days and can help your secure the best interest rate for your future purchase. Get Pre-Approved Now »
Can I finance any taxes, title, registration and/or loan processing fees?
Yes, taxes, title, registration and/or loan processing fees may be included in your loan amount subject to the loan amount meeting our LTV guidelines. You may also choose to pay for them out of pocket in which case, payment must be received prior to funding your loan.
If I am approved, how long will it take to fund my loan?
You can expect your loan to fund approximately 10-14 business days after loan approval and receipt of all requested documents.
Is there a pre-payment penalty on loans?
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Best For Bad Credit: Southeast Financial
For borrowers with bad credit, Southeast Financial is a good choice for a boat loan. This lender has no minimum credit score requirements, and loans are available even for borrowers with past bankruptcies.
No minimum credit score requirement
Discharged bankruptcies okay
Rates starting at 3.74% APR
Not available in Alaska or Hawaii
$20,000 minimum loan
High debt ratios may be a limiting factor
With a history dating back to 1936, Southeast Financial has been providing loans and other financial products to customers across the country for over 80 years. When it comes to boat loans, though, Southeast Financial excels at connecting borrowers with poor credit to lenders willing to finance their purchase.
Through Southeast Financial, subprime borrowers can access boat loans ranging from $20,000 up to $4 million, with no published credit score minimum. Borrowers with low credit scores or high debt ratios may not qualify for the best possible rates, but loans are available even to those with past bankruptcies.
New and used boat loans are not available in Alaska or Hawaii, and borrowers are only allowed to finance their purchase if the boat is intended for recreational useno full-timers or liveaboards allowed. Repayment terms may vary according to the loan amount but are available for up to 15 years.
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What Credit Score Do I Need To Qualify For A Boat Loan
A good to finance a boat is typically 680 or higher. Most marine lenders only work with creditworthy borrowers who have what is considered great or excellent credit. Sure, you may qualify for a loan with a lower credit score, but the maximum loan amount may be lower, the monthly payment may be higher, your loan application may take longer for credit approval, and you may be required to put down a larger down payment than a borrower who has a higher credit score.
If youre not sure what your credit score is, or you want to know if you will get approved for a boat loan or not, apply with Trident Funding online in just a few minutes. The initial application only requires a soft-pull on your credit score, and you will quickly find out if a boat loan is in your near future, or if you need to raise your credit score first.
How Much Boat Can I Afford
The amount of boat that you can afford depends on a number of factors. It will depend on your income, your credit score, and your liabilities. You may qualify for a million dollar boat solely based on your income, but when you factor in your monthly expenses, that number may change drastically.
The lender will take a look at your overall financial profile including your debt-to-income ratio to ensure that you can afford to purchase the boat and keep up with the monthly payments. You can check out a boat loan calculator to get an idea of how much boat you can afford. The calculator is a great place to start when youre boat shopping, but dont forget about additional expenses such as boat insurance, marina fees, and ongoing maintenance costs.
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Loan Features And Flexibility
Different boat loan features may offer flexibility, or make your loan easier to repay.
For example, some allow fee-free early repayments, which could make it easier to pay your boat loan off quickly and save on interest.
Others may allow you to borrow more than 100% of the boats value to buy boating equipment.
Boat Loan Calculator For Boat Financing Estimate Your Payments
We have made the process extremely simple for boat buyers and it will only require a few minutes of your time. Simply enter an estimate of the total purchase price of the boat, the number of months for the loan, and an estimated APR. Once you find the loan terms and payment of the loan amount you want, you can then submit your application for us to review your information for approval and in some cases give you, the lenders, advice. Youll be on your way to buying your amazing new boat with great boat loan payments.
The calculator will not ask you for sensitive data like your credit score, your previous personal loans, credit cards youve paid, or any other type of personal information. When youre ready to use our worry-free online system to apply for a boat loan, we strive to get you a credit decision the same day . If you qualify, you can be approved for a great interest rate loan from us for buying your new boat. Experience the worry-free and easy-to-use calculator today!
Disclaimer: This online calculator is only a tool for comparison and should not be considered a completely accurate quote of the total cost of the loan meaning the percentage rate of the loan term can still vary.
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What Are The Best Boat Loan Terms
Boat loan terms vary in length, anywhere from seven to 20 years, and occasionally 25 years. There isnt really a best when it comes to boat loan terms. Its all relative to your financial situation, the year of the boat, and the loan amount. If you have the extra money budgeted for larger monthly payments, and dont want to pay additional interest, then a shorter-term boat loan may be better for you.
Conversely, if youre buying an expensive boat, and want the cheapest monthly payments available, then a 20-year boat loan term may be more suitable for you. When you apply with Trident Funding, they will go over different boat loan terms, interest rates, and monthly payment options with you.
How Lenders View Credit History When You Apply For A Boat Loan
Here is how your credit history can influence your ability to be approved.
Comparison boat loan repayment examples are calculated using monthly repayments with a fixed interest rate on a 5-year term. They do not include any fees that may be charged by a lender in addition to interest.
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What Are Typical Boat Loan Terms
You can often expect boat loan terms to include a repayment period of 15 to 20 years. Down payments may range from 10% to 30%, depending on the amount borrowed, and typically the boat is considered collateral for the loan. Boat loans often start out as low as $5,000, with some lenders offering financing up to $4 million.
Keep in mind that the terms involved with the average boat loan will vary based on a number of factors. These include whether the boat is new, used, or being refinanced how old the boat is how much you plan to borrow and whether the boat is for full- or part-time use.
How Long Are Boat Loans
Repayment periods for boat loans vary depending on the type of loan you choose.
Unsecured personal loans typically have shorter repayment periods two to seven years. If you choose a secured boat loan, your term can be as long as 20 years.
Keep in mind the term you choose affects the interest you pay. Shorter terms have higher monthly payments but carry less interest.
For example, a four-year, $30,000 boat loan with an annual percentage rate of 15% will have monthly payments of $835 and cost $10,076 in interest. The same loan with an eight-year repayment term will have monthly payments of $538 and cost $21,683 in interest.
Use NerdWallets boat loan calculator to calculate your boat payments.
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How To Apply For A Boat Or Marine Loan
Every lender has different approval standards. For instance, banks and credit unions typically require you to have a decent income and credit score before theyll approve you for a loan with favourable conditions, while alternative lenders can be more lenient.
However, there are several documents and elements that youll need to apply for boat or marine financing with almost any lender, such as:
- Government photo identification
- Special licenses are required for piloting certain marine vehicles
- Proof of income
- Proof of bank account, debts and assets
- Information about the vehicle
- A completed application form and agreement
- A good credit score of 650 or higher
- A reasonable down payment
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How Much Does A Boat Cost
The cost of buying a boat varies widely depending on the type of boat you buy and whether you buy it new or used. The average cost of a new boat is typically $60,000 to $75,000, but you could end up paying far less or far more than that depending on what youre looking for. If youre looking for a personal watercraft, for example, you could pay as little as $9,500 or as much as $70,000 depending on the year, make and model of the boat.
Buying the boat is just the first expense. You also need to consider regular maintenance costs, insurance costs and potentially storage fees if you plan to store your boat at a marina. If you plan to take out a boat loan to finance the purchase, you also need to factor in the interest rate and fees of the loan.
Financing Options For Boat Buyers
Like other major discretionary buys, funding a boat purchase often requires financial resources beyond cash on hand. Banks, credit unions and other traditional lenders furnish payment options for boat buyers, who rely on various forms of financing to get the job done. People with cash savings may choose to put the boat on a credit card to secure points. Buyers with a strong credit score might consider a personal loan. Homeowners with significant equity might consider a home equity loan. Boat buyers also turn to dedicated financing from maritime lenders, specializing in marine craft credit.
Buyers with good credit references tap collateral loans to pay for boats, in much the same way cars are funded. Once approved, funds are issued and the boat itself serves as collateral for the loan. Failure to make timely payments can result in repossession, allowing lenders to seize and sell boats to recoup their losses.
Another form of funding with versatile applications uses the equity in your home to guarantee repayment. Home equity loans and lines of credit can be used for various purchases, including recreational watercraft. In order to initiate equity credit, most lenders require a current appraisal. In addition, home equity lines carry closing costs similar to conventional mortgages. Because the loans are backed by real property, however, interest rates are lower than those associated with other forms of funding.
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Boat Loan Interest Rates
Your boat loan interest rate depends on your credit report and credit score as well as the amount borrowed and the loan term.
Boat loans can be secured or unsecured. With a secured loan, the lender can repossess the boat if you dont make your payments as agreed. With an unsecured loan, the lender cannot repossess the boat. The lender relies entirely on your promise to repay the loan.
- Secured boat loan interest rates range between 4.5% to over 20%.
- Unsecured personal loan rates are comparable with those for secured loans if your credit is excellent.
Applicants with bad credit do better with secured boat loans because these are less risky for lenders.
What Kinds Of Boat Financing Rates And Terms Can I Expect
If youre looking at a secured personal loan, rates typically start around 2%, while unsecured loans can be slightly higher around 5%+. Keep in mind that these are starting rates and some lenders will charge upwards of 30%, depending on your credit score and other factors. For borrowers with a good to excellent credit score of 660+, rates will likely sit around the 7-12% mark.
Personal loans usually come with offer terms from one to either five or seven years. However if the boat is worth a lot, you may find terms much higher. Remember that a longer loan term will mean you pay much more in interest.
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