How boat loans work
Banks and other lenders have tailored their products to fit nearly every budget and lifestyle. However, there are two main categories that boat loans usually fall into: secured and unsecured.
Both of these options have pros and cons, but the loans and rates available to you will depend on the lending institution and your financial history. It’s important to understand the difference between the two types of loans before signing up for any financing.
Secured boat loans
A secured loan is geared toward lower-credit borrowers and is backed by collateral (property, a vehicle or a value item that's used to recoup the loan value if the loan payments aren't made). In the case of a secured boat loan, the boat itself could serve as collateral.
Due to the collateral provided by the borrower, secured loans usually feature lower interest rates than unsecured loans and are accessible to borrowers with a low score or thin credit history. Secured loans are also accessible to borrowers who may not have the best credit history, as lenders aren't as stringent with secured loan requirements.
Unsecured boat loans
An unsecured loan doesn’t require collateral, and generally comes with higher interest rates and more restrictions than secured loans.
Unsecured personal loans are a common boat financing option, as they generally come with better rates and have benefits, like repayment flexibility.
Where to get a boat loan
While there are multiple companies that offer boat loans, your loan details and offer will differ based on the lender or institution's qualifications. Make it a priority to research every one of the options listed below to make sure you're getting the best loan with the most competitive rate for you.
- Through an online personal loan lender
- Your credit union (or one in your area if you qualify for membership)
- A traditional bank, whether it be online or in-person at a brick-and-mortar location
- Through a marine-specific financing company or dealer
Where to get a boat loan
Boat loans are available for both new and used boats; generally the biggest difference between the two is in how much you'll need to borrow and where you get the loan from. If you buy a new boat, you may be able to get financing from the dealer or through a marine specialist. Used boats, such as those you buy from an individual, may not have dealer financing as an option, which would cost you more up front but less in the long-term.
Like most vehicles, the newest, biggest or most high-tech models end up costing the most. As a rule of thumb, assess the likelihood of a future upgrade to determine whether a loan for a new boat is worth it. If you have your eye on an upcoming model or an upgraded version of your current boat, consider looking at pre-owned boats so as not to put yourself in large amounts of debt unnecessarily.
New vs. used boat loans
Aside from the make and model, the biggest difference between new and used boats is how much you will need to borrow. Generally, new boats are going to cost more, so you will need to borrow more money or put down a larger amount up-front. The exception to that is if you are deliberately choosing a used boat that costs more than the price of a new boat because of the size or features.
The other difference may be in where you can get a loan. If you buy a new boat, you may be able to get financing from the dealer. Used boats, such as those you buy from an individual, may not have dealer financing as an option. However, online lenders will still be available to help fill in any funding gaps.
Can I lease a boat?
If you're itching to get on the water but don't live nearby or you foresee the boat being docked for most of the year, renting is a cost-effective and practical way to avoid the cost and routine maintenance of boat ownership. While in the long run renting is much more affordable, it can still require a large chunk of change.
Renting a non-luxury vessel can cost upwards of $200 per day, but it can cost as high as $50,000 per day if you rent a superyacht. When deciding whether renting is a good option for you, consider both the advantages and potential downsides.
- Try out different boat types
- Use the boat as much or as little as you'd like
- No upkeep or maintenance
- It's more expensive over time
- The boat may not be in perfect condition
- You have less freedom