Boat Loans

You will need to show the lender your financial ability to pay back a boat loan. Banks will look at your credit rating, so it’s important for you to look at it first. Three major bureaus provide this kind of information to lending institutions: Experian, Equifax and Trans Union. Start there.

It’s important for you to check your credit rating before the bank looks into it. Here’s why: If you find a problem or some inaccuracies, it’s much easier for you to get those straightened out before you apply for a loan.

Be sure there are no closed accounts that are being reported as open, and close any open accounts you don’t use anymore. By accessing your credit report first, you can stop problems before they start. There are lenders out there who will do subprime financing, which provides options for people with lower credit scores, but the national lenders will likely require credit scores to be 680 or higher. So, tidy things up before you begin.

Banks also look at your debt-to-income ratio, which is determined by dividing your monthly debt payments by your monthly income. Many lenders prefer a debt-to-income ratio of around 40 or 45 percent, including payment on the boat loan for which you are applying.

Lenders also will look at your net worth and liquidity. Your net worth is defined as assets minus liabilities – usually properties owned less any debt you have. A liquid asset is anything that can be turned into cash within 30 days or less.

“A cash down payment, net trade equity, or a combination of the two, will be required by the lender in all but rare circumstances,” said Robert Dunford, Director of Sales & Operations for Trident Funding. “But borrowers need to keep in mind that lenders will also require you to have sufficient cash reserves on hand after you have paid your full down payment. Lenders want to ensure that you have sufficient funds to cover the other expenses related to boat ownership, like insurance, fuel, slip fees, maintenance, in addition to your other household obligations.”

Boat down payments are usually between 10-20 percent, but can depend on the cost and value of the boat as well as your location and finances.

The boat loan rate for which you qualify is going to hinge on factors mentioned above, but it also could swing on the term of the loan — how many years you’ll be paying on it — or even the age of the boat you’re buying. For example, you might be able to get a better interest rate on a boat that’s as little as one year newer. In general, smaller loans for shorter terms usually have higher interest rates than larger loans for longer terms. Again, rates can vary with your credit history.

“One thing some first-time boat buyers forget or are unaware of is sales tax,” Dunford said. “Sales tax applies to boat and trailer purchases in all but a few states. Tax rates can be a flat charge or a percent of the purchase price. In addition to sales tax, buyers may also have costs associated with title and registration, U.S. Coast Guard documentation, lien perfection, and other service or administrative fees.”

Shopping for a boat loan overlaps with the process of buying a new boat. Here are the basic steps:

1. Know and understand your financial abilities and your credit rating. Check your credit with the major credit reporting bureaus and correct any inaccuracies.

2. Boat financing is not like financing a car where you can walk into a dealership and leave in a few hours with a new or used car. Boat financing can take longer if the lender requires a report from a marine surveyor.

3. When you apply, be ready with tax returns and bank statements that show your financial ability to repay. Be prepared to submit those materials to speed up the review process.

4. Be aware of special use limitations. If you want to live aboard your boat, use it for commercial purposes such as charters or as a fishing guide or to cruise internationally, tell the lender. Not all lenders will loan money on a boat used for those purposes.

Boat Trader offers resources to help you estimate your boat’s value. The criteria used to determine the value of a pre-owned boat can include size, age, model, and condition among others. Use Boat Trader’s search results to find the most current pricing on boats.

We also offer a boat price checker tool to help you understand the range of listed prices for your boat search.

Boat Trader’s preferred lending partner, Trident Funding provides customers competitive boat loans tailored for different financial situations. Trident Funding can help with dealer and private party purchases, boat refinancing and title and U.S. Coast Guard documentation services.

Estimate your boat loan rate today.

If you want to check what your boat loan rate and monthly payment could be, Trident Funding’s Boat Loan Payment Calculator can help you research that as well.

Below are some examples of monthly boat loan payments*:

Loan: $15,000
Down payment: 10%
APR: 6.79%
Example payment schedule: 144 monthly payments of $135

Loan: $30,000
Down payment: 15%
APR: 7.25%
Example payment schedule: 180 monthly payments of $273.86

Loan: $65,000
Down payment: 15%
APR: 5.50%
Example payment schedule: 180 monthly payments of $531.10

Loan: $200,000
Down payment: 15%
APR: 4.99%
Example payment schedule: 240 monthly payments of $1,318.81

*Estimated APR, or Annual Percentage Rate, is the annual cost of the loan, which includes other charges and fees. Actual rate and term can vary depending on credit history, collateral type, age of collateral, loan amount, loan term, loan to value, vessel registration type (LLC/Trust), state of residency and other criteria. Rates and terms may vary and are subject to change without notice. Credit score can vary depending on the credit reporting agency.

Payment example: A $76,000 loan for the purchase of a recreational use vessel for 20 years with a fixed rate of 4.12% would have an estimated APR of 4.12% and 240 monthly payments of $467.05.

How does a boat loan work?

A boat loan is a function of principle, an interest rate and the length of the loan. In general, smaller loans for shorter terms usually have higher interest rates than larger loans for longer terms. Also, higher credit scores help lower the interest rates you pay.

What information will I need to apply for boat financing?

Essentially, you will need bank statements and tax returns that demonstrate income. Banks also will consider your credit rating, your debt-to-income ratio, net worth and liquidity.

How do I know how much I can afford?

Banks can help you determine that, but you can also use our online boat loan payment calculator to find a payment you are comfortable with.

What credit score do I need for a boat loan?

The higher the better. Higher credit scores will help you secure loans at lower interest rates. There are subprime lenders out there, but by and large, major lenders want to see credit scores of 680 or above.

How long do boat loans last?

Terms vary with the size of the loan and your ability to pay, but expect to have a loan term of 24 to 48 months for trailerable boats and up to 240 months – or 20 years – for larger craft.