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The Best Boat Financing Companies
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If you’re thinking of getting a boat, you probably want to spend your money on that awesome watercraft, not on the loan you may need to get it. LendingTree crunched borrower data, interviewed experts and came up with three of the best boat loans.
Our top picks for boat loans
We analyzed more than 60,000 applications with eight lenders before narrowing them to the top three boat lenders that offered the lowest average APR over the first six months of 2020. All three lenders require good to great credit scores (680 or higher).
|Our Top Picks for Boat Loans|
|Boatloan.com||4.25%||Starting at $25,000||240 months max|
|Essex Credit||3.99%||$10,000 to $5,000,000-plus||48 to 240 months|
|LightStream||4.29%||$5,000 to $100,000||24 to 84 months|
This loan marketplace works with more than 16 financial institutions across 48 states. It offers new and used boat purchases, as well as refinance loans. Parent company Intercoastal Financial Group is a member of the National Marine Lenders Association, which means Boatloan.com brings boat financing expertise that a general bank or financing company might not.
Who it’s best for: Boatloan.com is best for people with a 680 or higher credit score who don’t need a boat loan immediately. It could take a couple of days for Boatloan.com to review offers before presenting them to you and closing on the loan.
Essex Credit offered the lowest average APR among loans we examined. Rates start at 3.99% for new, used and refinance boat loans; 3.99% is the starting rate for live-aboard boats. You could finance $10,000 to over $5,000,000 with Essex Credit. Terms range from 48 months to 240 months (2 to 20 years).
Essex, a division of Bank of the West, is willing to finance boats model year 2000 or newer that are purchased from brokers, dealers and private sellers. However, starting rates are higher for boats with model years of 2009 or older, as well as for houseboats and high-performance boats.
Who it’s best for: Essex is best for people looking to finance a large amount for a long term. You’ll also need a higher credit score if you want to qualify for your best rates: According to Essex, to qualify for the lowest advertised rates, the minimum credit score is 700.
This online lender offers the possibility of same-day funding with rates as low as 4.29% APR for new, used and refinance boat loans. Maximum loan amounts aren’t as large as other lenders on this list, but LightStream has the lowest starting amount, a good fit if you’re looking for a relatively inexpensive boat. The company is the online lending division of Truist, the bank produced by the merger of BB&T and SunTrust Bank.
Who it’s best for: LightStream is a best boat loan option for people with strong credit looking to get a loan quickly and pay it off relatively quickly, too — terms max out at 84 months.
Other places to look for boat loans
Start with your current bank or credit union. However, not all financial institutions offer boat loans, or they may categorize boat loans under their secured or unsecured personal loans, which could mean higher rates and/or lower loan amounts. By comparing rates, you’ll know you’re receiving the best deals for you — you could fill out a single form at LendingTree and receive up to five loan offers from lenders, depending on your creditworthiness.
You could also have the option of using a different type of loan to buy a boat, as we’ll discuss below.
Alternatives to boat loans
Thinking outside of the box, here are a couple ways you may be able to get money cheaper than with traditional boat financing.
Home equity loans
Real estate generally holds its value better than vehicles. Because of this, you may be able to get a lower APR on a home equity loan than a traditional boat loan.
“You can definitely use a home equity loan to buy a vehicle, but don’t wait to pay it off in 30 years,” said New Jersey-based financial planner Bernard Kiely. “Make your purchase and pay it off within a normal time frame for that type of purchase.”
Eric McClain, co-founder of a financial planning firm outside Birmingham, Ala., recommended a reverse mortgage as a consideration for people 62 and older. For this type of loan, you can either take out a one-time loan against the value of your home or receive monthly payouts.
According to McClain, “The key feature of a reverse mortgage is that no payments are required.” It can cost more overall than a home equity loan, but the money you borrow doesn’t have to be repaid until you sell the home.
With higher interest rates than boat-specific loans, personal loans aren’t usually the best option for a large purchase. If you’re deciding between a personal loan and a home equity loan, you can read more here.
If you’re older than 59½, you won’t have to pay the 10% penalty for withdrawing funds early from a retirement savings account, though you may have to pay income or capital gains taxes. If you do decide to go this route, McClain said to avoid withdrawing from Roth accounts.
“Because you have tax-free withdrawals on future growth, it’s better to leave them invested,” he advised.
These types of loans generally have high interest rates, but may be better than taking out retirement funds. In lieu of incurring penalties and taxes by taking a retirement distribution, these allow you to borrow against other investments.
“Borrowing doesn’t count as income, while selling securities or withdrawing from retirement accounts likely will,” McClain said.
Is boat financing right for you? 3 questions to ask yourself
If you have sufficient cash on hand, or if loan interest and fees make a boat loan more expensive than other options, it might be best to avoid marine financing. Here are some questions to consider when determining whether to finance a boat or buy it outright. You can always use a boat loan calculator to estimate the numbers.
Will buying outright get you the boat you want?
Financing often allows people to afford things they otherwise couldn’t at the time. By financing, you may be able to get a bigger or better boat than you could by paying cash.
Do you need to maintain a cash reserve? Balancing your assets and maintaining a cash reserve could be important to you. Depending on your cash flow, it might make more sense to finance, rather than spend your nest egg on a boat.
Do you have a good credit score?
A “good” credit score generally falls between 670 and 739 according to FICO®. Different lenders have varying requirements and not everything is determined by your credit score, but if your credit score falls well below that threshold, financing could be pricey and cash might be best. It’s important to check your credit score before applying for a boat loan; many boat lenders, including Essex Credit, have strict minimum credit score requirements for their lowest APRs.
Can you withdraw retirement funds without incurring penalties?
If you’re considering withdrawing money from retirement or investment accounts, make sure you’re aware of any withdrawal penalties or negative tax implications. It may make more sense to pay the interest charges on a loan rather than the penalties on a withdrawal.
“As a general rule, don’t use your retirement account as a piggy bank,” Kiely said. “You’ll have to pay the income tax on it, plus a 10% penalty, unless you’re older than 59 ½ years.”
Plus, he added, “If you withdraw cash for a large purchase and the market goes up 5%, you’re going to kick yourself.”
Solution: Split the difference
If you’re on the fence about what to do, Kiely advised paying half in cash and financing the other half: “If you go half way, you’re right no matter what happens.”
Boat financing when a boat is your home
Financing a boat with a home mortgage loan could qualify you for a mortgage interest deduction on your income taxes. To qualify, the boat must be your main home or second home. The IRS defines a home as a property with sleeping, cooking and toilet facilities — smaller or inexpensive boats may not have those. This may be an especially good fit for houseboat buyers.
Boat loan FAQs
Here are answers to some of the most frequently asked boat loan questions. You can find an even bigger list of boat loan FAQs here.
How do I qualify for a boat loan?
In short, have good credit and enough income to cover the loan payment. A hefty down payment may also be required. Read more about how to finance a boat.
How do I apply for a boat loan?
This depends on the lender. Most offer an online application. You may also be able to apply over the phone or in person of the lender of your choice.
Most lenders will want the following information:
- How much you want to borrow and for how long
- If you’re applying individually or with a co-borrower
- Contact and employment information for each person applying, including Social Security number and income
- Assets for each person applying such as home equity, savings, stocks, bonds and retirement funds
- Boat information, including year, make, model, length and classification
How do I get my best boat loan rate?
To get your best boat loan interest rate, compare offers and get an approval before you visit the seller. This way you’ll know what kind of APR you could expect when you walk in the door of the marine dealer. Ask the dealer if it can beat the deal you already have.
What credit score do I need to get a boat loan?
Bad credit boat loans are available, but you could get a boat loan with a potentially much better APR if you have a FICO Score of at least 680 with no major credit issues, such as bankruptcies, foreclosures, settlements or charge-offs, within the past three to five years.
How long can you finance a boat?
Boat loan terms can generally range from two years to 20 years, depending on the amount financed.
How do I know the value of a boat?
To find a new or used boat value, use the National Automobile Dealers Association guide. It’s an industry valuation tool that lenders use and it’s free for consumers to use as well.