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How Do Boat Loans Work? – Boat Financing in 2023

Written by Anthony Roberts / Fact checked by Jonathan Larson

how do boat loans work

Compared to cars, boats cost more. If you’re planning to get a loan, expect to spend more. Where and how do you get started? How do boat loans work? The factors present in a boat loan are your preferred boat loan, the terms, your credit, and your down payment. For a boat loan, you can reach out to credit unions, banks, online lenders, and other lending companies.

You can also contact boat dealers regarding boat loans as they can offer financing options, but it’s not always the case. To get a good deal, spend some time checking rates from other lenders or boat financing institutions. A guide like this article will help you get what you want without any regret.

Different Types of Boat Loans


Financing a boat can either be a secured or unsecured loan. There’s also a second mortgage and these options have benefits and drawbacks that are discussed as you continue reading.

1. Secured boat loan

As the name suggests, it’s the most secure boat loan option. But collateral is required as an assurance of payment to the lender. Once you fail to pay, the collateral will be collected instead. Some make the boat itself as the collateral and others choose their home equity loan. However, the second choice comes with longer repayment terms.

With the collateral involvement, this is the boat loan that gives you lower interest rates and higher limits on loans. If you can’t offer any collateral, you have to choose the other type of boat loan.

2. Unsecured boat loan

You don’t have to present collateral for this boat loan and it’s recommended if you have a good credit score. It doesn’t mean that this one is perfect. You may need to pay higher interest rates within a shorter period. Without collateral, the lender can sue you if you fail to pay. You should also know that this loan is a difficult process.

Some opt for personal loans to pay for this. It suits you if you have a sufficient income and a good credit score. You might want to take advantage of flexible repayment arrangements and competitive interest rates. It also allows you to pay the loan early or make payments that complete 100% of the principal.

Things You Have to Check Before a Boat Loan


You have to weigh these things before reaching out for help to finance a boat.

1. Validation of credit score

The lender will base your credibility to pay on your credit score. A lower score means a higher interest rate. On the contrary, you’ll be given a higher loan value with a lower interest rate if you have a good credit score.

2. Budget

When you set a budget for a loan for a boat, you have to base it on your annual salary or other income. Then, sum up your monthly expenses, including utilities, mortgage, auto insurance, and others. Once you calculate these things, you’ll know how much you can pay for a boat loan per month. Also, you have to consider some debts if you have any when making a budget for a boat loan.

3. Down payment

The down payment required by lenders for a boat loan is usually around 10% to 30%. Save for this first before processing the boat loan.

4. Going through different boats and prices

Devote some time and effort to researching different boats and their prices. You have to make a worksheet so you can easily compare them. Apart from price, you need to take note of their model, year released, and other specifications.

5. New or used?

Your dream boat may have a high price that doesn’t get along with your budget. You can find an offer for a new or used boat loan. The boat that you’re after has a lower price if it’s a used one. Check it or ask for advice from experts before making a decision. I just like to mention that Capital One is a lending institution that both offers new and used boats for a loan.

6. Lenders

Inquire about what lenders can offer so you’ll be familiar with typical boat loan terms. It will be advantageous if the interest rates are lower.

7. Get pre-approved

You proceed to this part after choosing a lender. Once you present documents proving your income, credit score, or debt if there’s any, you can get a pre-approved boat loan without affecting your credit.

8. Calculation

Know how to use a boat loan calculator through the following tips.

  • The interest rates spiral down when there’s an increase in loan prices.
  • The interest rates also decrease as loan terms do.
  • A high amount of loans can be paid for an extended time. It usually applies to 20-year boat loans.
  • All boat loans require a down payment of 10% to 30% of the boat’s price.
  • Know everything about the package you choose to roll the expenses of warranties and marine accessories like electronics and trailers.
  • Lenders find credit scores of 700 and higher favorable. They can approve your loan even with a bad credit score but expect to pay a higher down payment and interest rate.

Institutions That Offer Boat Loans


Check these institutions as boat financing options as they’re reliable and you’ll surely find the one that suits your financial status.

1. SunTrust

SunTrust or Truist can give you an unsecured loan and various lender options ranging from $5,000 – $100,000 to be paid for 24 – 84 months. You can access their lending division and LightStream online. Note that this bank requires a good credit score.

2. US Bank

Apart from boat loans, the US Bank also offers to refinance. You can either get a new or used boat for your loan, costing up to $150,000. To get the best rate, you have to finance a boat with a price that is over $25,000. The maximum period of a term is for 48 months. Automatic payment is required, so you need to open a savings or checking account on the US Bank.

3. Navy Federal Credit Union

The maximum period that this union can offer is a 15-year loan. You can choose from personal watercraft and used or new boats. Military members can avail of a rate discount as long as they submit a direct deposit. Credit union membership is usually given to armed forces in all branches as well as their families.

4. Bank of the West

This bank can process loans for personal watercraft and new or used boats. To be qualified, your credit score should be at least 700. The minimum loan is $10,000.


The term of USAA boat loans can go for 15 years. It also caters to refinancing boats, jet skis, and personal watercraft. Only members of USAA are allowed and they’re the former military men and their families.

Important Things to Guide You in a Boat Loan

These things are lightly mentioned above, so here are the detailed descriptions so that you can be guided.

1. Interest rate

As mentioned, the interest rate is particularly based on your credit profile and lender’s policy. Based on recent updates on APR or annual percentage rate, the interest rate for secured boats ranges from 4% to 6%. Other factors that can affect this are the boat model, loan amount, and term.

2. Repayment terms

If the lender allows, you can have a boat loan to be paid for 20 years. The loan amount is a consideration for prolonging the term. However, unsecured boat loans will be in a shorter period which can be 5 to 7 years. You maybe haven’t realized it yet but the longer-term means paying more for the interest.

3. Guide on applying for a boat loan

  • There’s no difference between a personal loan and a car loan when you apply for a boat loan. You have to choose a lender to start with. Online application is not always allowed so you have to go to the bank or the union office to process a loan in person.
  • You have to specify information about the boat that you choose like the type, age, and price. Also, disclose your assets, debts, and credit score.
  • After passing all the requirements, you have to wait for the approval. You can be updated the next business day or it will take a few days.

Takeaway on Boat Loans

How do boat loans work? There are two types of boat loans which are secured and unsecured. The first type requires collateral and the second one doesn’t. Long-term payment is allowed for the secured boat loan while it’s a shorter term for unsecured terms. Salary or income, debt, and credit score can determine the boat loan that you can have. Before making a decision, learn more about the lenders and their policies first.

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