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Boats are a large purchase, second only to a home, and the upfront cost may be challenging for many individuals to cover with their savings alone. Most people who buy boats will get a loan to fund this expense. Boat loans provide a great way to spread out this cost over time, making them more affordable. Boat loans can also open up the possibility of affording a higher-quality or larger boat than you could purchase outright, enhancing your overall boating experience.
A boat loan is a type of loan used to finance the purchase of a boat, such as a yacht, sailboat, or fishing boat. Boat loans are similar to other types of loans, such as auto loans or home mortgages, in that they provide borrowers with the funds needed to purchase the asset upfront, and then require the borrower to repay the loan over time, typically with interest.
Boat loans are typically secured loans, meaning that the boat serves as collateral for the loan, which can help lower the interest rate on the loan. Boat loans can be obtained from a variety of lenders and the terms and conditions of the loan will depend on the borrower’s credit history, the amount of the loan, and the length of the loan term.
Boat loans aren’t hard to get, but each lender will have their own set of boat loan requirements. You don’t have to have perfect credit or make a million dollars to get a boat loan. You will generally need a credit score of at least 600, enough money for a down payment of 10 to 20 percent of the cost of the boat, and you should be able to prove that you can afford the boat loan payments. If you’re not sure if you qualify for a boat loan, use a boat loan calculator to see how much boat you can afford and your estimated monthly payment.
Boat loans aren’t hard to get, but each lender will have their own set of boat loan requirements. You don’t have to have perfect credit or make a million dollars to get a boat loan. You will generally need a credit score of at least 600, enough money for a down payment of 10 to 20 percent of the cost of the boat, and you should be able to prove that you can afford the boat loan payments. If you’re not sure if you qualify for a boat loan, use a boat loan calculator to see how much boat you can afford and your estimated monthly payment.
Understand the ins and outs of boat loans before you apply
If you’re new to the boat financing process, you may wonder how boat loans work. There are a few important things you should know. A boat loan is similar to an auto loan but for a longer period of time. Boat loans typically have 10 to 20 year terms. This is the length of the loan and the time period you have to pay off the loan.
The boat loan term is determined by factors like your credit score, the boat´s age, and the cost of the vessel. The more expensive the boat, the longer the loan term, making monthly payments more manageable. For example, a $1 million yacht may have a 20-year loan term and a $50,000 fishing boat may only have a 10-year loan term. It’s important to choose a boat loan term that works best for your budget and your goals. Additionally, consider any fees or charges associated with your loan, such as origination fees, closing costs, and pre-payment penalties.
If you’re a well qualified buyer with a good credit score, you may have some say over your loan term. If you can manage higher monthly payments and want to pay the loan off as quickly as possible to avoid extra interest, then you can choose a shorter term. If you want your monthly payments as low as possible, you may want to choose the longest term available.
We make it easy to get pre-qualified and calculate your monthly payments to determine your budget and preferred terms. When you’re ready to apply, we’ll make it easy to provide your information to secure a boat loan. Just remember, boat loans aren’t hard to get if you pay your bills on time, have consistent income, can afford a boat, and have a good credit score.
In addition to loan terms, you should also know about boat loans rates. This is the interest rate, you, the borrower, will be charged to borrow money from the lender to purchase the boat. You’re agreeing to pay back the loan amount plus the agreed upon interest during the loan term. Boat loan interest rates can vary greatly, so it’s important to compare rates from multiple lenders in order to find the best deal. We make it easy by comparing over 15 marine lenders to get you the best rate and terms. You should also consider the size of your down payment, as this can affect the overall cost of your loan and your monthly payments. Use our boat loans calculator to see how your down payment will impact your monthly payments.
With boat loans, the boat serves as collateral for the lender, in the unlikely event that you don’t pay back the loan, and nothing can be worked out. Boat loan rates vary by market conditions, the age and price of the boat, as well as the borrower’s credit score, and overall financial profile.
When you’re ready to apply for a boat loan, there are a few requirements you need to meet. Lenders will typically require proof of income and good credit, as well as documentation about the boat you’re purchasing, such as its make and model, year, and value. Pre-qualify to get confidence in your estimated monthly payments and in your loan approval.
You will need to show the lender your financial ability to pay back a boat loan. Banks will look at your credit rating, so it’s 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.
It’s important for you to check your credit rating before the bank looks into it. Here’s why: If you find a problem or some inaccuracies, it’s 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 don’t 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.
“A cash down payment, net trade equity, or a combination of the two, will be required by the lender in all but rare circumstances” said Robert Dunford, Director of Sales & Operations for Trident Funding. “But borrowers need to keep in mind that lenders will also require you to have sufficient cash reserves on hand after you have paid your full down payment. Lenders want to ensure that you have sufficient funds to cover the other expenses related to boat ownership, like insurance, fuel, slip fees, maintenance, in addition to your other household obligations.“
”Boat down payments are usually between 10-20 percent, but can depend on the cost and value of the boat as well as your location and finances.“
The boat loan rate for which you qualify is going to hinge on factors mentioned above, but it also could swing on the term of the loan — how many years you’ll be paying on it — or even the age of the boat you’re buying. For example, you might be able to get a better interest rate on a boat that’s as little as one year newer. In general, smaller loans for shorter terms usually have higher interest rates than larger loans for longer terms. Again, rates can vary with your credit history.
“One thing some first-time boat buyers forget or are unaware of is sales tax” Dunford said. “Sales tax applies to boat and trailer purchases in all but a few states. Tax rates can be a flat charge or a percent of the purchase price. In addition to sales tax, buyers may also have costs associated with title and registration, U.S. Coast Guard documentation, lien perfection, and other service or administrative fees.”
Essentially, you will need bank statements and tax returns that demonstrate income. Banks also will consider your credit rating, your debt-to-income ratio, net worth and liquidity.
Banks can help you determine that, but you can also use our online boat loan payment calculator to find a payment you are comfortable with.
The higher the better. Higher credit scores will help you secure loans at lower interest rates. There are subprime lenders out there, but by and large, major lenders want to see credit scores of 680 or above.
Terms vary with the size of the loan and your ability to pay, but expect to have a loan term of 24 to 48 months for trailerable boats and up to 240 months – or 20 years – for larger craft.
The amount of the down payment on a boat loan varies. It’s usually anywhere from 10 percent to more than 30 percent. It depends on the borrower’s credit score, income, and overall financial profile. It also depends on the loan amount and the loan term.
Here are some estimates to give you an example. The average cost of a new boat is around $70,000. If you have excellent credit, you should expect to put down at least $7,000. If your credit is less than excellent, you may need to put down anywhere from $14,000 to more than $21,000. This is just the amount needed for the downpayment and doesn’t include closing costs, insurance, etc.
Boat Trader offers resources to help you estimate your boat’s value. The criteria used to determine the value of a pre-owned boat can include size, age, model, and condition among others. Use Boat Trader’s search results to find the most current pricing on boats.
We also offer a boat price checker tool to help you understand the range of listed prices for your boat search.
Boat Trader’s preferred lending partner, Trident Funding provides customers competitive boat loans tailored for different financial situations. Trident Funding can help with dealer and private party purchases, boat refinancing and title and U.S. Coast Guard documentation services. Estimate your boat loan rate today.