Before you start your search for the perfect boat, it pays to explore boat financing options. Depending on the price of the boat, your boat loan could be equivalent to a home mortgage with a term of15 to 20 years, or more! Financing less expensive boats is comparable to financing a car with similar considerations.

Boat Loan Terms

Boat financing tends to have higher interest rates than financing cars and homes. For example, a rate of 15.5% for a 60-month $9,999 boat loan isn’t unusual whereas comparable new car loans often feature interest rates of less than 5%. In general, interest rates go down as the loan value or length of the loan goes up.

Smaller boat loans, such as those under $30,000, have shorter lengths such as 60 or 72 months while larger boat loans, such as those in the $30,000 to $100,000 range have longer terms. When selecting a long term loan, consider how much your boat may be worth in 10 to 15 years. Depending on the boat’s depreciation and condition, you may be stuck paying high monthly payments for a boat that is no longer worth the price. In addition, you may not be able to sell the boat for enough to pay off the loan.

Where to Obtain Boat Loans

When buying a new boat, you have several financing options including dealer-arranged financing, credit union loans, bank loans, and Internet loans. While you may ultimately arrange financing through the boat dealer, it’s smart to check with your credit union, bank, and the Internet for competitive rates. Not only can having your own financing arranged in advance save you money each month, it can also provide you with an advantage when negotiating the final price.

Use the Internet to shop for the best interest rate possible. As illustrated above, boat loans in the 15% range are not uncommon. However, boat loans are also posted online at half that rate. If you have good credit, do not settle for outrageous interest rates just because you are buying a boat. Arm yourself with knowledge and negotiate the best possible rate. After all, you may be paying these boat payments for up to 20 years. 

Many boat owners have financed their vessels through home equity loans, second mortgages, and home refinancing. Depending on your financial situation, this may or may not be possible. If it is, taking equity out of your home to finance a boat loan does offer a couple of advantages including mortgage interest tax deductions and lower interest rates.

Getting Pre-Approval for a Boat Loan

Shopping around for interest rates is smart; getting pre-approved is even smarter. By having a pre-approval letter in your hands, you will be taken more seriously by sellers, especially if you are buying an expensive luxury yacht.

In addition, by going through the pre-approval process, you will find out exactly how much boat you can afford. You may have to scale back your boat-buying plans based on how much money the bank will lend you. You will also have a powerful negotiation tool which can result in getting more boat for less money.