3 Financing Options for Buying a Boat

Falling in love with a boat is easy, but finding the funds to purchase it is often much trickier. After all, boats may cost $10,000 or more, depending on the type of vessel. 

Fortunately, there are several boat financing options on the market, from boat loans to home equity loans, which could make it easier to close the deal on your dream vessel. The key is choosing a loan that could meet your needs while offering you the best terms for your unique financial situation. 

Let’s consider three different boat financing options. 

1. Secured boat loans through a marine lending specialist

Boat dealerships may offer access to secured boat financing through marine lenders. A secured loan is backed by something of value you own, called collateral. In this case, the loan is typically secured by the boat itself, and missing payments could lead to the lender repossessing the boat to recover the amount owed.  

At the same time, these secured boat loans can come with access to promotional deals, like insurance coverage or an extended service plan. Plus, the loan term may range as high as 15 or even 20 years. 

Marine lenders may accept applicants with lower credit scores, though you might still need a low debt-to-income (DTI) ratio — which is your monthly debt payments divided by your gross monthly income — and a down payment to qualify. Another important consideration is that some of these lenders may not offer financing for certain boat models or preowned boats. 

2. Boat loans through banks, credit unions and online lenders

Banks, credit unions and online lenders may also offer boat loans, which could come in the form of a personal loan, though you may still see it labeled as a “boat loan.” Since personal loans are so flexible, these loans may also be used to pay for boat maintenance and other costs, like mooring your vessel at a marina. Funds may be available within a day or two of signing your loan documents, depending on the lender. 

Boat loans through banks, credit unions and online lenders may be secured or unsecured, depending on your loan provider. Unsecured loans don’t require collateral, but may come with higher interest rates, lower loan amounts or shorter terms than secured loans.  

Loan terms and applicant requirements can vary widely. For example, unsecured personal loan terms typically cap out at seven years, while secured boat loans may have terms of up to 20 years. Generally, the higher your credit and the lower your DTI ratio, the better the terms you’ll be offered. 

Prequalification is a smart step to take to help ensure you’re eligible for a loan without harming your credit. The lender will perform what is known as a “soft pull” to check your credit report, which won’t affect your credit score. Prequalifying gives you a good idea of the loan amount and interest rate you might qualify for before you commit to a boat loan.  

If you’re planning to get an older boat and want to go the secured loan route, a marine survey can help you align the loan amount with the actual value of the vessel. 

3. Home equity loans

If you own a house, you may be able to take out a home equity loan to finance your boat. A home equity loan lets you borrow money against your home’s equity, which is your current home value minus your mortgage, or the amount of your home that you own. Home equity loans are paid out as a lump sum and typically have fixed interest rates, with terms ranging up to 30 years. 

However, it’s important to keep in mind that home equity loans are secured loans, and the collateral is your home. As a result, missing payments can have steep consequences, like your lender taking possession of your home to cover their losses.  

Home equity loans also come with upfront fees, which could increase the overall cost of borrowing. You may also be restricted to borrowing about 85% of your home equity, which can be a limiting factor. Weigh the various pros and cons before you make a decision. 

To qualify for a home equity loan, you’ll typically need at least 15% or 20% equity in your home. Lenders also typically look for a credit score in the mid-600s and a DTI ratio of 43% or less. 

Set sail with the right financing option 

With the right type of financing, owning a boat can go from a distant dream to a way of life. Doing your research to figure out which financing option is right for you can help you minimize the costs and focus on what matters: Enjoying your time out on the water. 

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