Key takeaways

  • You can secure a loan from a bank, credit union, or online lender to purchase a new or used boat.
  • The costs associated with owning a boat don't end at purchasing the vessel. Maintenance, storage, and insurance can add thousands of dollars in annual expenses that need to be accounted for before purchasing a boat.
  • Most people do not use a boat for the majority of the year, the average boat is on the water just 54 days out of the year — a consideration that should factor into the decision to purchase a boat.

Each year, Americans spend over $49 billion between boats, marine products and service, so it’s safe to say we love boating. But owning a boat is an expensive endeavor. Smaller used models can sell for as much as $20,000, while a new one can cost between $40,000 and 60,000, on average — and that’s just the beginning. Maintenance costs, insurance and other extras can set you back by several thousand more a year.

Regardless, buying a boat can be a fun investment, so if you’re thinking about joining in the boating fun, there are several factors to consider before applying for a loan.

5 factors to consider before applying for a boat loan

When it comes to purchasing a boat, financing is usually the way to go. That is especially true considering that the majority of boat owners (61 percent) have an annual income below $100,000. But even if you don’t have to pay the whole amount up front, there are still a few considerations to weigh in before applying for a boat loan.

1. Your credit

Most boat loans are issued based on credit, so the higher your credit score, the higher the chances you’ll get approved for the loan. Your credit score also plays a key role in determining how much you’ll pay on interest. Although some lenders may approve you for a loan with less-than-perfect credit, you’ll probably end up with a higher interest rate.

Before applying for a boat loan, make sure your credit is in tip-top shape. To do this, you can request a free copy of your credit report from all three major bureaus by visiting Although these reports won’t give you your actual credit score, they can give you an idea on where you stand with creditors, and whether you need to build your credit before applying for a loan.

2. Your budget

Just like with every other significant investment, such as a house or a car, it’s important to ensure that your future loan payment will fit comfortably into your monthly budget. Before applying for a loan, take inventory of your debts, minimum payment dues and other financial obligations, to understand how much boat you can afford each month.

Also keep in mind that, depending on the lender, you may be asked to give a down payment between 10 and 30 percent of the total loan amount. If you need help crunching the numbers, try using Bankrate’s boat loan calculator. This will give you an idea of your price range and the length of the repayment term.

3. The type of loan you’ll need

Boat loans can be secured or unsecured. Secured loans are those that require an asset to serve as collateral in case you default on the loan. Unsecured loans, on the other hand, don’t require any collateral and are issued based on credit.

If your credit needs some work, then going for a secured loan may be the better option. Secured loans are often easier to qualify for than unsecured loans as they are backed by collateral. Additionally, secured loans tend to offer lower interest rates than unsecured loans. However, if you default on the loan, you could lose the boat or any other asset that was used as collateral.

Unsecured loans are better suited for those with good-to-excellent credit and strong financials or for those who have a co-signer that meets these criteria, as they can secure the most favorable terms. If you fall behind on payments with an unsecured loan, the lender can’t seize any assets from you. However, your credit could be impacted for up to seven years.

4. The total cost of owning a boat

This shouldn’t come as a surprise, but the cost of the boat itself is just part of the equation. According to Bankrate, yearly boat maintenance costs are equal to 10 percent of the total cost of the boat. So, if you have a $40,000 boat that comes down to $4,000 a year. Likewise, you’ll have to pay insurance. Boat insurance rates are about 1.5 percent of the boat’s insured value.

Other costs to factor-in include:

  • Fuel
  • Dockage fees
  • Storage fees
  • Taxes
  • Registration

5. How often you’ll use the boat

According to the U.S. Coast Guard, the average boat in the U.S. is only operated for 54 days a year.

If you’re thinking about using your boat occasionally during Spring Break or summertime, then taking on thousands of dollars worth of debt, in addition to other expenses, may not be worth it. If that’s the case, you may be better off renting a boat for specific occasions. Although renting isn’t cheap either, it will save you money on insurance costs, maintenance and other fees.

How to qualify for a boat loan

In order to qualify for a boat loan, you will need to provide a potential lender with information about your financial situation. Lenders are likely to look at the following when determining your credit worthiness for a boat loan:

  • Income: Lenders will want to see your income to ensure that you have enough to make your monthly payments and repay the full loan. Collect your W-2s and other tax documents like pay stubs and bank statements.
  • Debt-to-income (DTI) ratio: Your debt-to-income ratio will be an important factor for lenders, as they want to ensure that you don’t have other financial obligations that may prevent you from making your payments. Preferred DTI is under 36%, but will vary by lender.
  • Credit score: In general, a higher credit score will result in better rates for your boat loan. Some lenders will have a minimum credit score that they are willing to lend to, but this will vary based on their lending conditions.

The bottom line

Financing a boat is a big financial decision that shouldn’t be taken lightly. But if after considering all of the above you’re still ready to make the move, make sure you shop around for lenders before applying for a loan. Some lenders even offer a pre-qualification tool, which allows you to check what you may be eligible for, without impacting your credit. Comparing quotes from multiple lenders is the best way to ensure you get the most favorable terms available for your situation.