How Does Boat Financing Work

Where To Find A Boat Loan

How long you can finance a boat may also depend on where you find financing. Here are some of the main venues where youll be able to find boat loans:

Dealer financing. About 80% of new boat financing deals take place through dealerships, according to Jim Coburn, a principal at Coburn Consulting Company and member of the Michigan Boating Industries Association. Banks have relationships with dealerships and dealerships have the customers, he said. They refer the boat loan customers to the banks.

Banks, credit unions and online lenders. Much of the remaining 20% of U.S. boat loans takes place directly through the lenders themselves. In researching rates from top boat lenders, we found APRs as low as 4.29% at online lender LightStream, a division of SunTrust Bank, and 4.29% at Essex Credit, a division of Bank of the West, as of publication. You also may be able to find competitive rates at credit unions or your own bank that may offer discounts to existing customers.

Shop around. If you do decide to buy a used boat, its important to make sure youre paying what the boat is worth. Consult an industry resource, such as NADAGuides to research values and prices in your area. Used or new, as youre determining which financing path works best for you, its crucial that you comparison-shop to compare rates and boat loan terms from a variety of lenders.

Financing Your Boat With A Personal Loan

Personal loans typically have very competitive interest rates and flexible repayment terms. If you have a good credit score and sufficient income, a personal loan may be a great fit for you. You can also make extra payments that go 100 percent toward the principal or pay the entire loan off early.

A personal loan is unsecured, meaning your boat or another asset wont be used as collateral. An unsecured loan is entirely based on your creditworthiness and verifiable income.

Once your loan request is approved and funded, you receive the entire amount in your bank account. You then can negotiate with the boat dealer or private party like a cash buyer.

Can I Finance A Boat With Bad Credit

Boat loans tend to have stricter credit requirements than mortgages and auto loans do, because they’re considered luxury items. You shouldn’t have any problem with a FICO score of 700 and above, but the further your score falls below that, the more challenging it will be.

Not all lenders have the same credit requirements for boat loans, so just because you’re turned down by one doesn’t mean you won’t be approved by another. Shop around. Be aware, though, that lower credit scores mean higher interest rates often dramatically higher.

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Shouldnt I Just Go With The Lowest Rate For My Boat Loan

A low rate on a boat loan is certainly seductive, but it is not the only factor to consider when securing financing. A Boat loan specialist can help you consider the big picture and factors that might affect your cost over the life of the loan, such as how long you intend to keep the Boat, what the terms are, and if there are any prepayment penalties. An experienced Boat loan Representative will make sure you dont miss the small print!

Other Lenders We Considered

• US Bank: This lender’s loan interest rates weren’t the most competitive, starting at 5.24% for a new boat. The bank states that rates may be higher for private party boat purchases, loans under $25,000, and used boats. Ultimately, lower rates may be available elsewhere.
• USAA: USAA is only available to people with military affiliations, limiting the number of people who can access these loans. However, even those eligible could get a better rate from one of our top picks interest rates start at 5.25% with USAA, about a percentage point higher than a LightStream loan.
• Navy Federal Credit Union: Like USAA, membership with this credit union is only available to certain people. However, a starting interest rate of 5.95% for new boats and 7.45% for used boat loans mean there are better deals to be found elsewhere.
• Boat US: This online boat loan marketplace didn’t beat interest rates offered by other lenders. A high minimum loan amount of $25,000 also may be more than many borrowers need.

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Who Will Provide Boat Financing

To get started, you should have a basic idea of the institutions that provide boat financing. If you start with these organizations, you should be able to find affordable terms for your boat loan.

• BANKSYou may be surprised by how many banks offer financing for boats. Visit your local bank and see if they have any options for you. You can often find the information you need on their website, but it wouldnt hurt to give them a call or even ask about boat financing options.
• Many credit unions offer boat loans to their customers, so if you are a member of any credit union, be sure to check into their options. These organizations usually have the most attractive rates and may even have a marine-lending specialist on staff.
• FINANCIAL SERVICE COMPANIESThere are also financial service companies that offer lending on boat and marine products. These companies have broad access to many different lending institutions, so you may find more options.

Boat Loan Terms: How Long Can You Finance A Boat

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Buying a boat? Before you gather your gear and take to the high seas, youll likely need to figure out how to afford your purchase. One of your key questions may be: How long can you finance a boat? Boat loan terms, unlike car loan terms, can stretch up to 20 years, nearly as long as a home mortgage. Whether you should borrow for that amount of time depends on several factors, including the cost of the boat, which can range from a new jon boat under $5,000 to million-dollar yachts. In general, the lowest interest rates are for the shortest loans, but your monthly payments would be higher.

• Boat loan FAQs

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Compare Multiple Offers Before Setting Sail On A Boat Loan

Be sure to compare as many lenders as possible when shopping around for a boat loan. Also consider any manufacturer or dealer financing available to you. This way, you can decide what best suits your needs.

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Bank Of The West Boat Loans

Types of boats financed: Boats must be model year 2001 or newer to be eligible. Bank of the West specifically says that it finances standard or custom power or sailboats, multi-hull boats, pontoon boats, and electric boats. The lender also offers loans for high-performance boats, houseboats, and wood hull boats. However, it does not finance boats that can exceed 99 miles per hour.

Loan amounts available: $10,000 and up for new and used boats, $25,000 and up for live-aboard boats. Loans over $2 million are available.

Watch out for: Credit score requirements. Bank of the West states on its site that it lends only to people with credit scores of 700 or higher.

Boat loans through Bank of the West and its lending division, Essex Credit, are a good option for people planning to get a boat loan of $50,000 or above.

A $10,000 boat loan with Bank of the West would have a starting interest rate of 8.89%, a $15,000 boat loan would start at 8.39%, and a $50,000 loan starts at 4.29%. While their rates for loan amounts over $50,000 are competitive, anyone looking for a smaller loan may find a better rate with LightStream.

It’s worth noting that this lender does have a loan processing fee that could add to your total cost of borrowing. A 10% down payment is also required for loans between $10,000 and $200,000, and percentages increase for higher loan amounts.

4.29% to 11.89%

Loan amounts available: $100,000 to $2 million

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Alternatives To Taking A Boat Loan

If you cant afford to buy a boat today, or youre not quite ready to make the commitment, here are some alternatives.

Save up for the purchase. Consider holding off and starting a savings plan toward buying a boat. You may be able to negotiate a cheaper price by paying with cash, and youll avoid paying interest on a loan.

Join a boat club. For a one-time fee and ongoing monthly or annual dues, boat clubs provide access to a fleet of boats for their members and guests.

Consider peer-to-peer rentals. Similar to renting a house on Airbnb, you can temporarily rent a boat through a peer-to-peer rental marketplace, such as Boatsetter or GetMyBoat.

Dont Forget Boat Insurance

Oh yeah, that. In your monthly budget, you should factor in the insurance premium for your boat. Your existing auto policy might cover a grace period that allows you a day or two to switch your policy to the new ride after leaving the dealer. Not so with boats. You should have boat insurance before you leave the dealership. Proof of boating insurance is mandatory in many states, and it might be required by the lender. Some marinas even require proof of a policy for rental slips, and for you tournament anglers out there, many tournaments require coverage. There are two main options for insurance policiesa new policy, independent from any other insurance policy you have, or an umbrella policy, which is bundled with your homeowners insurance. There are minimum required coverage areas, including liability to others, medical payments, damages, wreck removal and medical expenses for towed water-skiers. Remember, you want to be sure the cost of your boat is covered, as well as any injuries to you or other boaters and any personal items you have on the boat, e.g., watersports or fishing equipment.

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Can You Get A Boat Loan On An Old Boat

Getting approved for a boat loan on an older watercraft can be tricky, but it is certainly possible. Some lenders will offer used and refi loans on boats as old as 19 years. If the boat is of high value, you may even find lenders willing to finance a watercraft as old as 25 or 30 years.

Expect that interest rates for old boat loans may be higher than those for newer boats, and you may even encounter higher down payment requirements.

If youre unable to find a lender willing to finance your old boat purchase, consider taking out a personal loan instead.

Whether Youll Need A Marine Survey

When you apply for a secured boat loan, the boats value will be a factor in how much you can borrow.

If youre not getting a new boat, you should get a marine survey. During a marine survey, an inspector will examine the vessel, engine and trailer, detail the boats condition, note any repairs needed and determine whether its safe to take on the water.

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How Else Can I Pay For A Boat

If you cant find a boat loan near you or would rather not use it as collateral, you might want to consider these alternatives:

• Leisure vehicle loans. Some lenders offer leisure vehicle loans that cover a wide range of vehicles from jet skis to RVs and include boats.
• Save up. Not in a rush? Saving up is the cheapest way to buy a boat, since you wont have to pay any interest or fees.
• Rent a boat. Marketplaces like GetMyBoat act like Airbnb for watercrafts, letting you reserve one when you need it.
• Find a boat club. Boat clubs give you access to fleets of boats in exchange for a monthly or annual payment and you wont have to foot the bill for insurance and maintenance.

Examine The Finance Market

This is the time to source the right finance provider and the most appropriate policy parameters. Though you might not yet have found the specific boat you want to buy, you will have a plan regarding the boat type, the financial figures and the loan type so getting some research done at this stage will help you establish an Approval in Principle and ensure that everything is in hand once you reach completion stage.

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What Do You Need To Qualify For A Boat Loan

You will need to show the lender your financial ability to pay back a boat loan. Banks will look at your credit rating, so its important for you to look at it first. Three major bureaus provide this kind of information to lending institutions: Experian, Equifax and Trans Union. Start there.

Its important for you to check your credit rating before the bank looks into it. Heres why: If you find a problem or some inaccuracies, its much easier for you to get those straightened out before you apply for a loan.

Be sure there are no closed accounts that are being reported as open, and close any open accounts you dont use anymore. By accessing your credit report first, you can stop problems before they start. There are lenders out there who will do subprime financing, which provides options for people with lower credit scores, but the national lenders will likely require credit scores to be 680 or higher. So, tidy things up before you begin.

Banks also look at your debt-to-income ratio, which is determined by dividing your monthly debt payments by your monthly income. Many lenders prefer a debt-to-income ratio of around 40 or 45 percent, including payment on the boat loan for which you are applying.

Lenders also will look at your net worth and liquidity. Your net worth is defined as assets minus liabilities usually properties owned less any debt you have. A liquid asset is anything that can be turned into cash within 30 days or less.

Why Buy From Boateka

At Boateka were revolutionizing pre-owned boat buying by offering high-quality boats in a no-pressure, no-haggle boat buying experience. Every boat we sell goes through a 100-point checklist to become Boateka Certified. We can also help you find competitive financing for your boat and extend our free 90-day warranty for up to 3 years!

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How Much Does A Boat Cost

Boats vary depending on the type. You can expect to pay anything from $25,000 for a new motorboat to well over $1 million for a new yacht. Used models can go for even less.

Other expenses to consider

The boat itself is one of several costs that come with boat ownership. These include:

• Equipment. Consider the costs of decking out your boat. Electronics, water toys, accessories and safety equipment could set you back $1,500 or more.
• Operating costs. This cost will vary by the type of boat you choose and how you use it. However, the price of fuel should be a big part of your budget.
• Boat maintenance. All boats need regular maintenance to remain safe. Costs vary depending on your boats age, model and your mechanic.
• Storage. Mooring fees are calculated by the length of your boat and if you store it in an expensive area.
• Boat insurance. Depending on the type of boat you have and where you store it, boat insurance can cost you $100 or more every year.

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Ways To Finance A Houseboat

Theres no one way to get a houseboat, noted David Raney, senior vice president of residential lending at Seattle-based Sound Community Bank. If a consumer doesnt mind mixing and matching liabilities, there are going to be more affordable ways to do it, he said, mentioning that if you have trouble finding a specific houseboat loan, there are alternatives:

Banks, credit unions and online lenders: A bank or credit union where you already have an account may offer boat loans. Ask if a lender is willing to take on this type of boat at the amount and terms youll need. You can also check with online lenders. You could fill out a single online form at LendingTree and receive several boat loan offers from lenders, based on your creditworthiness.

A broker will help you with the buying process, and theyll be able to use their connections to help you arrange financing. Typically, deals are made between two brokers: your buyers broker and a sellers broker. They act similarly to a real estate agent, helping you negotiate with a sellers broker. But thats not to say that it doesnt come with a markup on the sellers end it generally costs a seller 10% more to use a broker, so expect to pay for the expertise somehow.