How Long Can You Take A Boat Loan Out For?

Getting a boat can be an exciting prospect Whether you’re looking to go fishing, water skiing, or just cruise around the lake, having your own boat opens up a world of possibilities However, boats can be quite expensive, often costing tens of thousands of dollars or more. Very few people can afford to pay cash upfront for a boat. That’s where boat loans come in handy.

Boat loans allow you to finance your dream boat spreading out the payments over months or years. But just how long can you take a boat loan out for? The answer depends on several factors. Keep reading to learn more about typical boat loan terms and what determines how long you can finance a boat purchase.

Typical Boat Loan Terms

Most boat loans are structured similarly to car loans. The lender will offer you a loan amount, interest rate, and repayment term. Here are some common boat loan terms:

• Loan Amount – Boat loans can range from a few thousand dollars for a small fishing boat to hundreds of thousands for a large yacht. The amount you can borrow depends on factors like your income, credit score, and the value of the boat.

• Interest Rates – Interest rates on boat loans are generally around 5-10%. The rate you qualify for depends on your credit score and history. Those with excellent credit can get the lowest rates.

• Loan Term – Boat loan terms are usually 10-15 years. Again, your creditworthiness affects the term lengths you may be offered. Borrowers with great credit may get offers for 15-20 year loans.

What Determines the Loan Term?

When you apply for a boat loan, the lender will assess your financial situation and the boat you want to buy to decide what loan terms to offer you. Here are some key factors that determine how long of a loan term you can get:

• Your credit score and history – Borrowers with higher credit scores and a solid history of managing debt well will qualify for the longest loan terms and lowest interest rates. Those with poor credit may only get approved for a short 5-year loan.

• The loan amount – In general, the higher the loan amount, the longer the term you can get. For very expensive boats, lenders may approve a 20-year term. Smaller loans may max out at 10 years.

• Your income and expenses – Lenders will look at your debt-to-income ratio to ensure your income is sufficient to manage the monthly payments. The lower your other monthly debt payments, the more comfortable a lender will be approving a longer term.

• Down payment amount – The size of your down payment can affect the loan term. In general, the larger down payment you put, the longer the loan term you can qualify for.

• Type of boat – Certain types of boats may only qualify for shorter term loans. For example, loans on pontoon boats often max out at 10 years, while yacht loans could be 15-20 years.

• New vs. used boat – New boats tend to qualify for longer loan terms than used boats. Many lenders limit used boat loans to 10 years or less.

How Long is Typical for a Boat Loan?

Now that you know what goes into determining the loan term, what is the typical range for most boat loans? Here’s an overview:

• New boats – Expect loan terms of 15-20 years for new boat purchases, especially for larger, expensive boats. Creditworthy buyers often qualify for 20-year loans from lenders.

• Used boats – Used boat loans tend to top out around 10-15 years. Some lenders limit used boat loans to 10 years or even less. Shop around for the best term.

• Small boats – Smaller fishing boats, runabouts, and bowriders often max out around 10-15 year loan terms. Buyers may need to put more money down to get the longer 15 year term.

• Large boats – Larger, more expensive cruisers, sailboats, and yachts over 25 feet can usually qualify for 15, even 20 year loan terms from most lenders.

• Poor credit – Borrowers with poor credit often are limited to short 5-year loans. Improving your credit can open up much longer 10-15 year loan terms.

How to Get the Longest Loan Term

If your goal is to secure the longest boat loan term possible, there are some steps you can take:

• Have a large down payment – Putting down 20% or more gives lenders confidence in approving a longer term.

• Improve your credit – Increasing your credit score and showing responsible borrowing history will earn you the best rates and longest terms.

• Lower your debt – Cut down on other monthly obligations so you have more free income to dedicate to the boat payment.

• Ask about long terms – Many lenders will advertise 10 or 15 year loans, but may approve 20 years if you ask.

• Comparison shop – Check with multiple lenders to find ones that offer better terms than competitors. Credit unions often have great boat loan options.

Weighing the Pros and Cons of Longer Terms

Is a longer boat loan term always better? Not necessarily. Here are some pros and cons of long loan terms to consider:

Pros

• Lower monthly payments
• Allows you to afford a more expensive boat
• Smaller down payment needed

Cons

• You pay more interest over the life of the loan
• Loan balance takes longer to pay down
• Higher chance of being underwater if selling before loan is paid off

Carefully consider your budget and boating needs. Don’t stretch the term longer than you need just to lower payments. A shorter term with higher payments can save you substantially in interest costs over time.

Boat Loan Rates And Fees

When comparing boat loan offers, look beyond just the loan term length. Rates and fees can vary amongst lenders as well.

• Interest rates – Each lender sets its own rates based on your creditworthiness. Comparison shop for the lowest rates.

• Origination fees – Some lenders charge 1-2% of the loan amount as an upfront origination fee. Try to minimize this cost.

• Prepayment penalties – Avoid loans with prepayment penalties, fees charged for paying off a loan early.

• Closing costs – You may have to pay some small closing costs like document or title fees when finalizing the loan.

Ask the lender to fully disclose all rates, terms, and costs so you can accurately compare options.

Alternatives To Boat Loans

One final option to consider is avoiding a traditional boat loan entirely. Here are some alternatives for financing a boat purchase:

• Home equity loan – A home equity loan or HELOC can provide affordable financing by using home equity as collateral.

• Personal loan – Unsecured personal loans typically have higher rates than a boat loan but don’t put your boat at risk if you default.

• Credit card financing – Only recommended if you can pay off the balance in the intro 0% APR period, usually 12-18 months.

• Dealer financing – Some boat dealers offer their own in-house financing which could be convenient but cost more.

• Buy used – You may be able to pay cash for a used boat that costs significantly less than a brand new model.

• Save up – Putting away money monthly into a dedicated boat fund can give you a nice down payment to get better loan financing.

The Bottom Line

At the end of the day, only you can decide if it makes sense to finance a boat and for how many years. Just be sure you are comfortable with the monthly payments and fine print before signing anything. Boats provide years of enjoyment out on open water. Finding the right financing helps more boat lovers get out there and make memorable experiences.