There’s nothing like hitting the lake on a hot summer’s day and zipping around in the family boat. But financing a boat is a significant expense for most people. Taking the time to consider your available budget for the purchase, as well as future income, will go a long way toward finding the option that fits with your lifestyle. There are a few different ways to secure a boat loan, so let’s start with the basics.

What is a boat loan

A boat loan is very similar to an auto loan. Most leaders will ask the borrower to fill out a loan application, which can be fairly thorough and usually takes some time to complete. Lenders will also likely ask for additional information like tax returns and proof of assets. Don’t be surprised if the lender asks to see a detailed account of your personal finances — they want to make sure they’re giving a loan to someone who can pay it back.

Applying for a boat loan definitely takes some time and planning. The loans and rates available to you will depend on the lending institution and your financial history.

Get pre-qualified

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

The different kinds of boat loans

Banks and other lenders have tailored their products to fit nearly every budget and lifestyle. The different kinds of loans available for large purchases like boats are vast and varied. However, there are two main categories that loans usually fall into — secured and unsecured. Both kinds of loans come with their own strengths and weaknesses, and some borrowers may only qualify for one or the other. But it is vitally important to understand the difference between the two types before signing up for any financing.

Secured versus unsecured loans

A secured loan means that the money being lent is backed by collateral — something of value that can be used to recoup the cost of the loan if the borrower fails to meet the payments. Homes, vehicles, and other valuable items are commonly used as collateral. The new boat itself could also be considered collateral for a secured boat loan.

Secured loans offer borrowers two main advantages. They usually feature lower interest rates than unsecured loans because the lender is taking on a lower risk, due to the collateral. Secured loans are also accessible to borrowers who may not have the best credit history. Even those with faulty credit might be able to qualify for a secured loan after doing a little homework on available lenders in the area.

An unsecured loan doesn’t require collateral, but that doesn’t mean it comes without strings attached. Unsecured loans usually have higher interest rates and more restrictions than secured loans. The application process is also more difficult for unsecured loans.

Many people decide to go the route of personal loans when looking into boat financing options. Personal loans are unsecured loans that can offer better rates than traditional funding sources.

There are many great benefits of using a personal loan when looking for an unsecured boat loan.

  • A personal loan is a great option when looking to finance a boat. They typically have very competitive interest rates and flexible repayment terms. You can also make extra payments that go 100% toward the principal – or pay off the entire loan early.
  • Unlike a secured loan, a personal loan is unsecured, meaning your boat or another asset will not 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 into your bank account. You then can negotiate with the boat dealer or private party like a cash buyer.

How boat loans work

Typically, banks require 10% to 15% down for a purchase of a boat. Although there are a few choices for budget boats, most of them cost well into the thousands, and anyone in the market for a luxury boat can expect the price tag to be far more than what most families have on-hand for recreational expenses.

You can finance the down payment with a personal loan—or even use one to finance 100% of the boat. Personal loan interest rates are competitive, and if you have a good credit score and sufficient income, a personal loan may be a great fit for you.

What to consider before getting a boat loan

Once you have your sights set on the boat of your dreams and are ready to look at financing the purchase, take a moment to consider all factors that could affect your final decision.

Remember that the price tag is just one of the expenses attached to owning a boat. Maintenance and insurance can quickly turn into large-ticket items. And if you plan on keeping the boat at the local marina, expect to pay monthly for renting a storage area, as well as additional administrative fees.

Anyone about to take out a loan should also take an honest look at personal finances and future earnings. Once the contract is signed, the money must be paid back. Make sure to look closely at the fine print.

Get pre-qualified

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

Where to get a boat loan

Banks and other lending institutions are the traditional places to get boat loans. Asking your personal bank for financing options is a good place to start. Having a positive, pre-established relationship with a bank can go a long way toward getting you approved with a good rate.

Many boat dealers now offer financing options of their own. However, this isn’t always the case, and any financing that is available from a boat dealer should be checked against rates offered by other lenders.

Researching online marketplace lenders can be another cost-effective method for boat financing. There are lenders online who specialize in almost any sort of loan imaginable. When other loan companies can’t provide the right option, finding an online lender could be the ticket to cruising the lake in a new family boat.

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