Boats are a major purchase. The price will vary depending on the type of boat, the size and whether it is new or used. The average 20-foot boat brand new could cost $40,000 to $60,000.

Many people who decide to buy a boat will explore financing options.

What Is a Boat Loan?

Boat loans are a type of personal loan for borrowers who want to purchase a boat. Several different types of lenders offer boat loans.

These loans are similar to auto loans. Some lenders offer boat-specific loans, but many offer personal loans that can be used for many purposes, including the purchase of a boat.

How a Boat Loan Works

Boat loans are installment loans, which means you will repay the amount borrowed in monthly amounts with interest. Typical considerations include:

• The amount you can borrow: The total amount that you borrow will depend on the boat you want to purchase and your lender's discretion.
• Interest rate: Your interest rate will be fixed or variable. The rate will be determined by factors like the loan term, the type of boat, your creditworthiness, and market conditions.
• Repayment terms: Repayment terms will vary, but you can expect to find terms of 10 to 15 years. Some lenders have repayment terms of up to 20 years. Unsecured loans typically have longer repayment periods than secured loans.
• Down payment: Some lenders will require that you pay a percentage of the total loan amount in the form of a down payment. Down payments typically range from 10% to 30%.
  

Types of Boat Loans

Borrowers can compare different types of boat loans to determine their best option.

Secured

Boat loans can be secured. Secured loans require collateral. In most cases, the boat you purchase will serve as the collateral. If you are unable to make your loan payments, your lender could take the boat.

Lenders may offer secured loans to people who have poor credit.

Unsecured

Unsecured loans do not require collateral. Lenders will decide to offer an unsecured loan based on the borrower's creditworthiness. This type of boat loan may come with a higher interest rate because it is riskier for the lender.

Home Equity Loan

A home equity loan, also referred to as a second mortgage, enables homeowners to borrow against the equity they have in their homes. This is a type of secured loan; your home serves as collateral.

Home equity loans tend to have low interest rates, but if you are unable to repay the loan, you risk losing your home.

Personal Loan

Boat loans are a type of personal loan, but you can also consider a general personal loan to finance your purchase. Personal loans can be used to cover a wide variety of expenses, including a boat. The interest rates and terms of personal loans can vary significantly.

Where to Get a Boat Loan

Several different types of lenders offer new and used boat loans.

Banks

Some banks offer boat loans. For example, Bank of the West offers loans up to $5 million. Interest rates start at 8.99%, and its loan terms range from five to 20 years.

Credit unions

Credit unions are nonprofit, member-owned institutions, and some offer boat financing. Mountain America Credit Union has interest rates starting at 8.74% and loan terms of up to 15 years.

Online lenders

Many online lenders specialize in personal loans, which can make them a good option for boat loans. LightStream offers loans up to $100,000. If you have excellent credit and sign up for autopay, you could qualify for an interest rate as low as 8.49%. The lender has loan terms of two years to 12 years.

Marine dealerships

You may be able to apply for a loan through a marine dealership that sells boats. Some dealerships partner with boat loan companies to give customers access to dealer financing options.

What to Consider Before Applying for a Boat Loan

Before you apply for a boat loan, consider:

• Your credit score: Your credit score will play an important role in determining the interest rates and terms that lenders offer. If you have poor credit, you may only qualify for a secured loan or a loan with a high interest rate. Boat loan credit requirements will vary depending on the lender.
• Your ability to repay the loan: A boat loan calculator can help you figure out the total cost of the loan. Will you be able to afford the monthly payments? If you can't, you could risk damaging your credit and losing the boat.
• Total cost of ownership: The purchase price of a boat is not the only cost to consider. You also have expenses like gas, maintenance, taxes, and storage.
  

How to Apply for a Boat Loan

• Choose a lender. Find a lender that fits your needs.
• Gather the necessary information. The lender will want to know details about the type of boat you plan to purchase, as well as personal information on your income, assets, and debt.
• Apply. Some lenders have an online application process. Other lenders, such as banks and credit unions, may require you to apply in person.
  

Pros and Cons of Financing a Boat

Pros

• Access to funds: A boat loan can give you access to the funds you need to buy your dream boat.
• Flexibility: With a multitude of lenders offering boat loans, you can shop around to find flexible terms that meet your needs.
  

Cons

• Risk: A loan is a financial obligation. If you cannot repay it, you could damage your credit. In the case of a secured loan, you could lose your boat.
• Depreciation: Boats depreciate over time. It is possible that the boat will become less valuable than what you owe your lender.

The Bottom Line

A boat loan can be a useful financing option if you have always dreamed of getting out on the water in your own boat. Like any other loan, it is important to consider all of your options and compare interest rates and loan terms before making a decision.