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How to Find the Best Boat Loan Rates

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When you’re shopping for a boat, your focus might be on the size, year and model of your new watercraft. But before you start seeing what’s out there, consider figuring out your boat loan first. While financing is available, qualifying for decent terms can take some research and preparation.

Whether you’re buying your very first boat or are an experienced sailor, this guide will help you find your best rates for your upcoming loan. We’ve analyzed the different options available and asked for tips from experts at the National Marine Lending Association (NMLA) and the Boat Owners Association of the United States (BoatUS), a national advocacy group for recreational boaters that also offers services such as boat loans, insurance and towing for boats stuck on the water.

The basics of boat loans

There are three main strategies used to buy boats: traditional boat loans secured by the watercraft, unsecured loans, such as personal loans, and home equity loans and lines of credit (HELOC).

Secured: Much like a loan for your car or recreational vehicle is backed by your vehicle or RV, secured loans are backed by your boat. The lender places a lien against your watercraft, so you don’t own it outright until you’ve paid off the entire debt. The loan application process can take longer because the lender will consider the boat and your credit before deciding. David Mann, manager of membership programs at BoatUS, said this is the most common type of boat financing, especially for loan amounts over $50,000.

Unsecured: When you take out an unsecured boat loan, you’re only backing up the loan with your credit and not the boat itself. It’s essentially a personal loan for cash, which you can spend however you want, including by buying a boat. This speeds up the application process, so these loans are growing in popularity.

Unsecured loans may also be your only option to buy inexpensive boats worth less than $10,000, as secured loans generally do not go this low. However, there’s a limit to how much you can borrow through an unsecured loan, so realistically this approach will only work for loans up to around $50,000.

HELOC/home equity loan: If you own a home, you can also finance your purchase by taking out a home equity loan or borrowing through a home equity line of credit. Using this strategy, another type of secured loan, you borrow against the value of your property to receive cash, which you can then use to buy your boat. Just make sure you can cover the loan, because if you fall behind on the payments, you could lose your home.

Traditional boat loans: what to expect

  • Amounts may range from $10,000 to more than $10 million
  • Terms may span 48 months to 240 months

Your boat loan’s interest rate and terms will depend on a wide range of factors, including the type of boat you’re trying to buy, the amount you’d like to borrow, your credit score, the type of loan you’re setting up, whether you make a down payment and the lender.

Robin Cottmeyer, association manager of the National Marine Lenders Association, said boat loans can range from $10,000 to more than $10 million and the parameters vary accordingly. According to Mann, the typical boat loan lasts between 10 to 20 years and the lender will ask for a down payment of at least 10-15% of the value of the boat.

Essex Credit, one of our top picks for boat loans, offers loan terms as short as 48 months all the way up to 240 months. Its interest rates range from 4.59% up to 7.69% at time of publication. Your actual terms will depend on many different factors, so the only way to know for sure is by shopping around.

How to apply for a boat loan

As you get ready to apply for a boat loan, expect the process to be a little more difficult and lengthier than applying for a car loan. “Lenders see a boat as a luxury item,” said Mann. “You need a car, you need a house, but chances are you don’t need a boat.” Lenders have tougher underwriting standards for boat loans because they realize if someone has financial trouble, chances are they will stop making payments on their boat loan before other obligations.

Mann described the underwriting process as more closely resembling a mortgage than an auto loan, even though boats are typically closer in value to cars.

Lenders may ask to see your bank statements and tax returns to verify your financial information. They could take several business days to go over your documents, especially if you are taking out a secured loan and they need to appraise the boat.

Mann acknowledges the type and size of your boat loan make a difference for the underwriting process. “If you’re buying a small, $15,000 boat the process can be pretty quick. It starts to get more difficult when you’re borrowing $50,000 or more.”

What if you have bad credit?

If you have bad credit, it could still be possible to take out a boat loan. There are some nationwide lenders that specialize in offering bad-credit loans to applicants with subprime credit scores as low as 550, provided they have verifiable income. However, interest rates could be higher. If you have an existing relationship with a local bank or credit union, they may be more willing to give you a boat loan even if you have a weaker credit score.

Where to find boat loans

There are a few different types of lenders, each with varying strengths and weaknesses.

Large national banks and credit unions: Large national banks and some credit unions are more likely to have a specialty division that deals with marine lending. If so, they will understand how to compare different types of boats, and this will be part of their underwriting process. This  has pros and cons. On one hand, their experts will spend more time on your application as they review the type of boat you’re looking to buy. Expect tougher lending standards and a longer process. On the other hand, they will be more knowledgeable about boats and could tell the difference between various manufacturers to finetune your loan offer. This specialized knowledge can come in handy, especially if you’re buying a larger or more expensive boat.

In addition, when you qualify for a boat loan from a specialty watercraft division, chances are you’ll receive a lower interest rate and a better selection of terms.

Some of the main large boat loan lenders include Essex, part of Bank of the West, online lender Lightstream, part of brick-and-mortar bank SunTrust, and U.S. Bank.

Regional banks and credit unions: Smaller regional banks and credit unions do not tend to have a division focused on boat loans. It’s too much of a specialty product. Since they do not have the same ability to review the actual boats, their loan application process can be quicker. They treat it more like a standard vehicle loan. In exchange, their terms and rates may not be as attractive as a large bank with a specialty marine loan division.

Online lenders not affiliated with banks: While some brick-and-mortar banks have online divisions to process boat loans, online lenders not affiliated with banks are relatively rare in this market, according to Mann. While there may be some appearing in the fintech space, it’s still not that common. If you work with an online lender, the key is once again to do your research and see how its terms, rates and conditions compare against a regular bank/credit union.

With online lenders, you also will not be able to speak with a representative in person because they don’t have physical branches. Consider whether you can get by without this additional customer service.

Dealers/manufacturers: If you buy your boat from a dealer or manufacturer, it could also offer to set up your financing. But Mann pointed out that this market is not as developed as auto loans. “Manufacturers and dealers typically end up using the same lenders that you would apply to as an individual,” said Mann. So, you can expect to get similar financing terms through a dealer or manufacturer to what you would if you applied for a boat loan on your own.

How to find your best boat loan rates

When it comes to finding a quality boat loan rate, it pays to shop around. The terms for boat loans can be quite different between lenders. The only true way to know who can give you your best rate for your specific type of boat is to compare multiple offers. If you’re looking for a fast and easy way to compare boat loan offers, you could fill out a single online form at LendingTree and receive offers from up to five different lenders, depending on your creditworthiness.

To guide your research, you should determine your top priority for the boat loan. Are you looking for the lowest possible interest rate? A longer loan term? A loan with a smaller down payment? This could influence the type of lender you choose.

If you plan on using the boat for a few years, you might care more about a quick application process than the interest rate. But if you want to keep your boat for 20 years, controlling borrowing costs may be more important. If you aren’t sure what you want, this calculator lets you experiment with different boat loan terms to see how your payment would change.

Talk to your lender and explain exactly what you’re trying to buy and how you plan on using the boat. This can help them fine-tune their loan offer. You should also ask how they set their rates based on the type of boat because this can have a big impact. For example, going from a 2001 to a 2002 model of the same boat may not seem like much of a chance, but it could push you into a completely different set of interest rates from a lender.

The bottom line

Navigating the boat loan market takes a little more work than the auto loan market, especially since terms can change so much between lenders. But that means putting in that time is even more worthwhile because it can help you find a better deal.

For help finding your best terms, Cottmeyer recommends that you work with lenders who understand the product, especially for loans of $50,000 or more. “Boat dealers and especially lender members of the NMLA are excellent sources,” she said.

By using the information in this guide and taking advantage of available resources, such as the NMLA or BoatUS, you can find the very best terms for your upcoming loan. Enjoy your new boat!


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