Boat Loans 101

Recreational boating is a popular activity all across the United States. In fact, more than 100 million Americans¹ go boating at least once every year. This popularity is one reason why the boating industry sees more than 300,000 new boats sold every year.

With attractive boating destinations ranging from the Lake of the Ozarks to other popular lakes and rivers throughout the state, Missouri has a thriving recreational boating scene enjoyed by both residents and tourists alike. If boating is a regular activity for you or your family, it might make sense to invest in a boat to call your own. 

Although the sticker price for a new boat is hard for many consumers to afford out of pocket, boat loans are a great financial product to fulfill your boating dreams without breaking the bank. Read on for everything you need to know about your boat loan options.

What Is a Boat Loan?

Boat loans are consumer loans created specifically to help potential buyers purchase boats. These loans can be found through some marine vehicle retailers, as well as local banks and credit unions.

The price of a boat can range widely depending on the size of the boat, its onboard features, and whether you buy new or used. For a new boat, the average price range typically falls between $30,000-$50,000, although the price of your preferred boat could be well above or below that price range. 

Given this high cost, many consumers will be interested in financing to afford that purchase while preserving their cash reserves. In general, the best financing options for your boat will be found through a lender that specializes in personal boat loans.

How Do Boat Loans Differ from Other Auto and Consumer Loans?

Although boat loans are essentially the same as auto and other personal loans, there may be differences from these loan products in terms of the interest rate offered, as well as the amount you’re able to purchase.

Any lender that offers boat loans will separate these loans out with interest rates independent from auto and other consumer loan products. If you plan on using your boat as collateral for the loan—which many lenders may require—you might also experience a smoother application and approval process by working with a lender that offers boat loan products, because they likely have processes and protocols to efficiently process and approve these loans.

Some consumer loans may allow you to purchase a boat with those funds, but traditional auto loans typically will not allow a boat purchase. In addition, a specialized boat loan may make it easier to afford your boat purchase along with other related costs, such as taxes and fees. You may find the repayment terms preferable when compared to alternative financing options.

Where Can I Find a Lender That Offers Boat Loans?

Because boat loan products vary from one institution to the next, it’s smart to check with your local bank or credit union to see if they offer boat financing. 

Given the popularity of boating in Missouri, many local banks and credit unions may offer boat loans as part of their financial services. Contact local banks and lenders in your area to find out what sort of loan products they offer for boat purchases.

Local marine retailers may also be able to recommend local lenders with a good reputation. Marine retailers sometimes offer in-house boat loan services, likely through a relationship with an outside financial institution. If you’re interested in retailer financing, you should also gather quotes from outside lenders to make sure you’re getting a fair rate.

What Are the Benefits of Purchasing a Boat with a Boat Loan?

Even for consumers who can afford purchasing a boat without the help of financing, a boat loan can make buying a boat less of a financial strain by improving your ability to pursue other goals and manage your money over time.

Many of these benefits are similar to the benefits you might enjoy when taking out an auto loan for a vehicle, including the following:

1. Reduced Up-Front Financial Commitment

Regardless of whether you can afford the entire boat or simply a large percentage of the boat’s cost on your own, a boat loan can help you preserve your available cash. This cash can then be put to other financial goals, such as major purchases, long-term savings, or stashing money in your emergency fund.

2. Increased Purchasing Power

If the boat you want to buy is beyond what you can afford in cash, a boat loan can help you manage that purchase—while still giving you flexible, affordable options for repayment.

3. Competitive Rates and Repayment

Although boat loan rates are typically higher than auto loan rates, these rates are often comparable to personal loan rates, and lower than options many alternative lending sources may offer. Similarly, boat loan repayment terms can be customized to suit your desired repayment length, as well as the monthly payment you can comfortably afford.

4. Low Loan Origination Costs

Many boat loan lenders charge an affordable origination fee between 2-5 percent for the loan. These rates vary, though, so it’s important to shop around and factor in this fee when comparing the interest rates offered by competing boat loans. You may also be able to negotiate lower rates based on the offers from other lenders, further reducing these costs.

5. Fixed Monthly Boat Expenses

Although maintenance and storage fees will continue to increase the cost of boat ownership over time, your monthly payment for the boat itself will be a source of financial stability as you manage these costs within your budget.

How Do I Compare Boat Loans from Different Lenders?

Gathering quotes from multiple lenders is the best way to ensure fair terms for your boat loan. Once you have these quotes in hand, here’s how to compare them to determine which loan offers the best fit for your needs:

• Interest rate: A higher interest rate will lead to more total interest paid over the life of the loan. Some lenders may offer a lower interest rate in exchange for accepting a shorter, more aggressive repayment term.
• Lender experience with boat loans: When lenders are familiar with the process of approving financing for boat loans, you may experience fewer speed bumps and administrative issues on the way to getting your loan approved.
• Repayment length: One of the best ways to choose your repayment term length is to figure out how large of a payment you can comfortably afford. From there, you can choose a repayment term that fits into that allotted budget space, minimizing the financial strain created by your purchase.
• Origination and early payment fees: As mentioned above, origination fees can vary from lender to lender. Some lenders may also charge an additional fee for paying off your loan in advance. This is something to consider if you decide to take out a loan with hopes of paying off your balance ahead of schedule.

What Should I Expect During the Boat Loan Application Process?

The boat loan application process will be similar to any other consumer loan, and it’s often completed within a week—or sometimes within a day or two. 

Most lenders will be primarily concerned with ensuring that you can afford this debt, given your monthly income. Lenders may also want to use the boat as collateral for your loan, which may require an additional loan processing step of confirming the boat’s appraised value.

The best way to facilitate a fast, painless application process is to gather all of the lender’s required documentation prior to applying. This will likely include proof of ID, proof of address, and proof of income, including bank statements. Check with the lender to make sure any other required documentation is provided upon application. 

Once you have applied, be responsive to the lender’s phone calls, emails, or other requests for information. This will ensure that the lending process stays moving, resulting in a faster approval for your boat purchase.

Thinking about buying a boat? It’s always smart to get pre-approved for your purchase to make sure you know how much boat you can afford. Contact your local bank to get started.

As you look ahead to financing your boat, it’s also wise to consider how you might use the cash reserves you don’t need to commit to your boat purchase. Read our quick guide “How to Build an Emergency Fund in 4 Steps” for our expert insights.

¹ https://www.nmma.org/press/article/23527