The average cost for a boat has gone up an average of 7% each year since 2003 and hit $82,000 in 2017. Of course, the type of boat you choose greatly influences the cost.
But even at half of the average, it’s still an expensive purchase that most people don’t make out-of-pocket. The good news is that there are many boat loan options to choose from.
However, you’ll want to know a few things before making a decision to ensure you get the best deal.
Boat loans overview
Boats are expensive, so getting approved for a loan amount that is high enough to cover the cost is typically an important concern for borrowers. Beyond the loan amount, you will also want to find an option that is affordable.
The main cost you are going to be looking at is the interest (usually charged as an annual percentage rate). Additionally, there may be other fees such as those for originations, closing, appraisals, inspections, etc.
Then, there’s the term a lender offers which determines how long you will have to repay the loan. Note, it will also influence your interest rate and monthly payment amount.
All of these factors will come into play when shopping for the right boat loan.
Now, let’s take a look at five different ways to get a boat loan.
5 ways to get boat loans
1) Boat dealers
Boat dealers work at dealerships that sell boats. Like a car dealership, they can sell you the boat and finance it for you, which can be very convenient.
They may offer direct financing or may work with a network of finance companies. Further, they work with manufacturers and often offer discounts and promotions through them.
The downside of working with a dealer is that, when they sell you the boat and set up your financing, they may not always have your best interests in mind.
For example, if a lender is offering the dealer commission to sell their loan, the dealer may be more inclined to offer you that solution, even if it’s not the best for you.
Being so, consider the deal a boat lender offers you but also do your research to see what kind of financing you can get elsewhere.
2) Online personal loan lenders
Personal loans can be used for almost any purchase (including buying a boat). If approved, you will receive the lump sum and will repay it through installment payments over a set term (usually somewhere between 12 and 84 months).
The costs may include an origination fee and will include interest.
To get approved, you will need to have decent credit and reliable income. There is a wide range of companies that target different audiences, from borrowers with poor credit to those with excellent credit.
You can find out what you qualify for in minutes without hurting your credit score. Using SuperMoney’s personal loan engine, simply enter in your basic information and we will communicate with many lenders to see which ones pre-approve you.
The upside to this option is that there are many lenders in the industry, so the rates can be competitive. And in many cases, you won’t have to use the boat as collateral (which means no inspections) and will have the power of a cash buyer in negotiations.
Further, the online process is very convenient and the money can be in your account as soon as the same day.
The catch? You have to have good credit and a certain level of income to get the best rates and terms.
Browse and compare personal loan lenders here
3) HELOC lenders
Home equity lines of credit are another option. If you have built up equity in your home, you can gain access to it through a lender who offers HELOCs. By doing so, you borrow against a percentage of the equity you have built.
For example, if your home is worth $250,000 and you have paid $150,000, you would have $100,000 in equity. In this case, you could apply with a HELOC lender and potentially get a credit line for around 80% of your equity, which would be $80,000.
A HELOC is a revolving type of credit, which means you can withdraw from it as needed and you only pay interest once money has been used. Typically, the credit line is available for a set term and, when it ends, the repayment period begins.
The upside to HELOC loans is that you don’t have to have as good of credit as with a personal loan because the loan is secured by your home. Further, the closing costs are usually slim to none, and the credit line amount can be sizeable.
However, you do need sufficient equity in your home and are also putting your home at risk for foreclosure in the case that you default on the credit line repayment.
4) Credit cards
Credit cards can also be a good option for some future boat owners. While in many cases the interest rate will be more expensive than other loan options, there are exceptions.
If you have excellent credit, you may have a very low rate and high credit limit which will work well for a boat purchase.
Another option to consider is a card with 0% interest introductory period. Some offers extend as long as two years. This can enable you to purchase the boat and not pay any interest during that period.
When the period ends, the interest rate will increase so be sure to consider how much you will be able to pay off during the promotion.
Keep in mind, if you do have a remaining balance after the promotion ends, you could possibly pay it off with a lower-interest loan.
5) Boat loans from third-party lenders
Lastly, select private financing firms, commercial banks, credit unions, and retail service companies offer loans specifically for boats and other marine vehicles. In these cases, the loans will be secured by the boat or another vehicle.
A few companies you might recognize that offer boat loans are Bank of America, BB &T Bank, M & T Bank, SunTrust Bank, and US Bank.
The upside to these lenders is that they are experienced with lending to borrowers for new and used boats. However, you may be subject to more restrictions than you would face with an unsecured loan.
In summary, there are many financing options that can help you when you are looking to buy a boat. The best solution won’t be the same for everyone.
It depends on the boat you want, your credit, if you own a home, and more. You’ll have to analyze your situation, weigh the pros and cons, and choose the one that provides the best overall value.
Secured vs unsecured boat loans
One of the deciding factors will be whether you opt for a secured or unsecured loan. Here’s a quick look at the pros and cons of each option:
Unsecured boat loans
Unsecured boat loans, such as personal loans and credit cards, are not secured by collateral.
Unsecured boat loans can be a great way to finance the watercraft of your dreams when you don’t or don’t want to use collateral. However, they are not for everyone. Compare the pros and cons to make a better decision.
- Lenders have no rights to your boat
- Shop as a cash buyer with the loan proceeds
- Finance 100% of the boat’s cost
- Choose any boat you want
- Use the boat however you want
- There’s less documentation
- Choose from many lenders
- You must have good credit and verifiable income to qualify
- Can face legal action if you default on the loan
- May not be able to get a loan amount high enough to afford the boat
Secured boat loans
Secured loans, such as HELOCs, home equity loans, and boat loans from dealers, do require collateral to secure the loan.
Secured boat loans can be a smart way to qualify for the best rates and terms, but thye are not for everyone. Compare the pros and cons to make a better decision.
- Lower interest rates
- Higher loan amounts
- More leniency with credit requirements
- Lenders put restrictions on the use of your boat
- Insurance is often required
- Loan is not dischargeable if you file bankruptcy
- Lenders can restrict what kind of boat you purchase
- Down payment is usually required
Unsecured loans grant you more freedom but getting approved for competitive rates and a large enough loan amount depends solely on your credit and income. It’s a good idea to check out both options to evaluate which will offer the best overall value.
How do you get a boat loan?
So, how do you get a boat loan?
Follow these four steps:
- Check your credit score and credit reports: Ensure everything on your report is accurate and that your score is in good shape. Most lenders require borrowers have at least a 620 credit score and no recent delinquencies. Consider a credit counseling firm if you need help making improvements.
- Know your financing options: You’re already on the right track by reading this article. Research your options and identify those that will be best for you.
- Research and get quotes from lenders: Once you know the types of financing you are interested in, review lenders and get offers from at least three in each financing type (i.e., credit cards, HELOCs, personal loans, etc.).
- Compare offers and weigh the options: Next, compare all of the offers along with the pros and cons of the financing types and choose the one that offers the most value overall. Be sure to consider monthly costs, overall costs, convenience, and collateral requirements.
After following these steps, you’ll be ready to buy your boat with full confidence.
Find the best solution for buying your boat
Now you know the basics about boat loans including what they are, where to find them, and how to choose the best one. At SuperMoney, our goal is to make it easy to shop around and compare lenders so that getting a good deal isn’t a hassle.
Simply head over to our product comparison pages to read in-depth company reviews from industry experts and candid reviews from past customers.
Further, compare dozens of companies side-by-side and even find out which lenders will pre-approve you without hurting your credit score.
A great place to start is with personal loans. Click here to get started!