Boat Loans – The Definitive Guide

Finance a Boat With a Personal Loan

Some people find boats exciting, and when you own one of your own; you can hit the wide-open waters whenever you’d like. Purchasing a boat outright with cash might be impractical for most. Often, a boat loan is considered in this instance when you’d like a boat of your own. 

If you’re already in the market for a boat loan, then you know making an informed decision is important. Here is where you can find easy-to-read and digest information to help you make a decision on whether a boat loan is right for you and your financial situation. 

What is a Boat Loan?

A boat loan is a loan that is used to purchase a recreational boat. It is an installment loan that comes with fixed monthly payments. They are usually paid over two to 20 years. The interest rates and terms of the loan will vary based on who you’re borrowing from, the size of the loan, credit score, income, and whether it is an unsecured or secured loan. Learning how boat financing works can help you make a more informed decision.

Boat Loan Repayment Terms

Boat loan repayment terms vary from lender to lender. However, they can have terms that go up to 20 years time. This is almost as much as a mortgage. How much you pay per month depends on the cost of the boat, as well as the interest rate. The repayment terms are almost always per month. The longer the term, the less you will have to pay per month. If the repayment period is shorter, the payments every month will be larger. 

Down Payment May Be Required 

Those who are considering a boat loan will want to keep in mind that a down payment may be required. Generally, 10% to 30% is usually the amount that is required to obtain a loan. This depends on the credit score and history of the borrower and the lender. 15% is a good general rule of thumb to save up. Usually, the worse your credit is, the more you will need to put down. The better your credit is, the less you have to put down as a down payment on the loan. 

Interest Rates

Interest rates vary based on market conditions and the economy. Currently, in October 2021 they are between 4.29% and 11.89% depending on where you obtain the loan but also your credit profile. The better your credit, the better the interest rate is going to be. Just like the worse your credit, the worse or higher the interest rate is going to be. It is important to read the paperwork on the boat loan should you get approved for one prior to signing. You can learn not just the repayment terms and amount, but also the interest rate you’re given.

What to Consider Before Applying for a Boat Loan

When applying for a boat loan, there are factors to consider. Be prepared during the application process by knowing what to expect in the process ahead. 

Costs of Owning a Boat

Knowing the costs of owning a boat can help you determine not just what type of boat to get, but also the additional costs associated with owning one. The initial cost of the boat can range from $10,000 to as high as $500,000. This all depends on the type of boat you choose to get. Houseboats, yachts, and cabin cruisers are more expensive. Trawlers, catamarans, and sailboats are more affordable on the list. 


Maintenance and repairs will be required on the boat every year, as well as taxes, insurance, registration, storing for winter months, mooring, gas, and other factors all play a part in how much you spend on the boat. This varies based on location. 


Life jackets, throwables, and other inflatable products for safety will be necessary. This also includes oil and fuel to get the boat around. This can easily cost more than a vehicle would. 


If there is not a body of water in your backyard, then paying to dock it with a marina, and store it for those colder months (if necessary) are also additional purchases that will have to be made. 


Boats can easily cost thousands of dollars per year to maintain. Prepare yourself and know your finances are able to handle these costs before making a purchase.

Do You Need a Marine Survey?

When applying for a boat loan, you may consider a marine survey. For new boats, you don’t usually need to have a survey completed, as the boat wasn’t ever used previously. If you’re purchasing a used boat, however, a boat survey is a common practice. 

Boat surveys will help to determine the actual value of the boat in question. You can also expose any areas that need replacing or repairs. 

Types of Boat Loans

Secured Boat Loans

Secured boat loans are the most common type of boat loans. The boat finance is secure because they place a lien on the boat, and you get ownership of the boat by being able to put it in your name. This loan type comes with lower interest rates compared to an unsecured boat loan, and it is generally almost always a fixed interest rate for the life of the loan. They are predictable. However, if you fail to pay the loan, they can come and take the boat, as this is collateral during the payment period. 

Unsecured Boat Loans 

Unsecured boat loans do not require any collateral at all. However, they do have higher interest rates and there are many more restrictions to obtain this type of boat loan.

How to Get a Boat Loan?

Step 1 – Determine the down payment amount you can afford

Since you’re financing, it is safe to assume that you are unable to cover the entire cost of the boat. You will have to put money down on the loan though. The down payment is a big consideration. Knowing how much you can safely save and afford can help you get better prepared before applying for a loan. 

Step 2 – Determine the amount you can afford to pay monthly

Calculate how much you could comfortably pay per month based on your income. Let your lender know what payment you’d feel comfortable paying when applying for the loan. They will do their best to help fit the payments with your comfort level. Consider how much you pay monthly, your debt, and how much excess money you have to work with. 

Step 3 – Check your credit score

Before applying for any loan, it is recommended that you check and understand your credit score. This has a lot to do with the loan terms and interest rates you will get when working with any lender.

There are a number of free programs that can be used to check and keep track of your credit score. They include, but are not limited to:


  • Credit Sesame
  • CreditKarma 
  • Mint
  • CreditWise
  • Experian 
  • TransUnion 


Credit scores are calculated using five different factors. These factors are any outstanding debt, payment history, recent inquiries, credit history, and the mix of credit types. 


Step 4 – Compare loan offers

Comparing loan offers can help you make a more informed decision on which offer is the best to go with. They will offer different repayment terms, as well as interest rates and more. Usually, the best boat loans come from the best lenders, so you have to do the research to learn which one that would be. 

Step 5 – Get pre-approved for a Boat loan

Once you’ve decided on which lender to use, most people look to get a pre-approval. You will have a better idea of the amount you’re able to spend and can shop with more confidence. This also instills confidence in the seller, as they can see you’ve done the research and have a loan waiting for your purchase. You will have to send in the required paperwork to be approved during this time, which will save time on the actual loan process. Here is a quick checklist of some of the documentation you will need. 


  • Insurance policy
  • Purchase order 
  • Copy of title 
  • Builder’s certificate for new builds 
  • Private party purchases may require further documents 
  • Identification 
  • Proof of income 


Additional documents may be required from you, including those for the trailer being financed with the boat. Ask the financial institution the exact paperwork they need to fulfill the pre-approval process. 

Step 6 – Make an offer on a boat that fits your budget

Know the budget you’re given by the bank, as well as what a comfortable amount would be for you. Once you know these specifics, you can shop for a boat that fits your budget. Negotiation is something many purchasers do, but this is a personal preference. 

Step 7 – Secure the Loan from Selected Lender

Once your offer was accepted, it is time to secure the loan completely. You’ve already handed in the paperwork that is necessary to get pre-approved, so they would finalize the deal with the specific boat you’ve chosen. This is subject to credit approval, as well as little to no changes made from the pre-approval process. 

Why Would You Need a Boat Loan?

In 2021, The average boat price in the USA was $20000
There are a number of reasons why you’d need a boat loan. The first and most common reason is that you cannot finance the complete boat purchase with cash alone. Wanting a boat is a personal preference, but you may have to obtain a loan or financing to purchase the boat. 

Having an idea of the costs of maintenance, care, and the boat itself can help you choose which boat is the best for you and your needs. For example, if you’re looking for a family boat then you’d likely be looking at spending at least $12,000 for a decent-sized one. 

Those who want further adventure, and are looking into speedboats are looking at a higher price tag of around $75,000 spent on a boat. The type and size of boat you choose will determine how much you spend on the boat, to begin with, as well as for maintenance, docking, and any other fees associated with owning the boat over time.  For example, in 2021, a houseboat would cost you a $100000

Docking can cost a few hundred dollars per year to keep the boat on the water and docked to be used. However, this is not necessary if you want to take the boat home with you. In this instance, regular maintenance, cleaning, and hauling of the boat have to be considered as extra expenses. 

It is important to look into all of the specifications of the loan prior to signing on with it. Look for the length of the loan, the amount, repayment terms, and any penalties for early repayment. Understanding the loan you’re getting helps you make an informed decision. 

Boat loans are a useful tool that some people choose to utilize when they have a high enough credit score, as well as a clear credit report. 

Depending on the boat you decide to get, the prices, interest rates, and payments you have to pay each month will vary. This is important to consider, as you want to stay within a healthy limit for your boat purchase. Speak to the lender regarding requirements and terms to find out exactly what they are offering to those interested in purchasing a boat. You may be surprised at the terms and interest rates they’re able to offer. 

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