Can You Refinance a Boat Loan? Everything You Need to Know

Purchasing a boat is an exciting milestone. After searching for the perfect vessel, you finally found “the one” – your dream boat. But now comes the less glamorous part figuring out how to pay for it.

Many boat buyers turn to financing to fund their purchase. Boat loans allow you to buy the boat you want while paying it off gradually over many years. However, the loan terms you agree to on day one aren’t necessarily set in stone forever. So can you refinance a boat loan if you want to adjust the terms later on?

What Is a Boat Loan Refinance?

Refinancing a boat loan means replacing your existing loan with a new one. The new lender pays off your current boat loan balance, then you begin making payments to them under the terms of your new refinanced loan.

A refinance can be with your current lender or a completely new lender. Either way the goal is to change the loan terms to better suit your needs now.

Even long boat loans that stretch 15 or 20 years can be refinanced before reaching maturity. When you refinance a boat loan, you reset the clock on your loan term.

Top 5 Benefits of Refinancing a Boat Loan

Why might refinancing your boat loan be smart? Here are some of the top benefits boat owners can gain from a refi:

1. Lower Interest Rate

One of the main reasons to refinance a boat loan is to lock in a lower interest rate. When you first bought your boat, interest rates may have been higher. Now, market rates may have dropped significantly from when you originally financed. Refinancing could lower your rate by 1-3% or more.

Over the life of a 10 or 15 year boat loan, a lower interest rate can save you thousands in interest charges.

2. Lower Monthly Payments

Through refinancing, you may also be able to reduce your monthly payment amount. This can be done by lowering your interest rate or extending your loan repayment term.

If your budget has changed or money is tighter, refinancing into more affordable monthly payments can help avoid loan default or repossession.

3. Remove a Co-signer

Did you use a co-signer to qualify for better loan terms at the time of purchase? A refi enables you to apply for a loan in just your name. This releases the co-signer from the financial obligation.

To do this, you’ll need to show you now qualify on your own based on income, credit score, debt-to-income ratio, etc.

4. Shorten Loan Term

On the flip side, maybe you want to pay off your boat faster. Refinancing into a shorter loan term increases monthly payments, but pays off the principal much quicker.

You’ll save on interest and own your boat free and clear sooner by reducing the loan length.

5. Cash Out Equity

If you have substantial equity built up in your boat, some lenders may allow you to tap into it with a cash-out refinance. This option gives you cash in hand while folding the payout into your new loan balance and monthly payments.

When Is the Best Time to Refinance a Boat Loan?

Wondering if now is a good time to refinance your boat loan? Here are some signs refinancing could benefit you:

• Interest rates drop – If rates fall at least 1% below your current boat loan rate, refinancing can lock in savings. Monitor the Fed’s rate moves.

• Improved credit – Has your credit score recently increased by 50+ points? See if you now qualify for a lower rate.

• Monthly payments too high – To lower your payment, refinance for a lower rate or longer loan term.

• Removing co-borrower – If you need to take over ownership in your name only, refinancing can remove the co-signer.

• Want to pay off loan faster – Shortening your loan term through a refi increases monthly payments so you pay principal down quicker.

Step-by-Step Guide to Refinancing a Boat Loan

Ready to refinance your boat loan? Follow these steps for a smooth process:

1. Review your credit report

Pull your credit reports from Equifax, TransUnion and Experian. Verify all information is correct – inaccuracies can negatively impact your rate. If errors exist, dispute them ASAP.

2. Research current rates

See what current boat loan rates are, and the rates/terms for which you’d qualify based on your credit score, income, debt-to-income ratio, etc. This helps set expectations.

3. Determine your goals

Know exactly what you want to achieve by refinancing. Do you want to…

• Lower your interest rate?
• Reduce monthly payments?
• Shorten or lengthen repayment term?
• Remove a co-borrower from the loan?

4. Gather paperwork

To apply for a refi, you’ll need personal and financial information handy, including:

• Driver’s license
• Pay stubs
• W-2s
• Tax returns
• Boat registration
• Current loan statement showing remaining balance

5. Apply with lenders

Apply directly through your current lender, or shop around with others to compare loan offers. Getting pre-qualified helps you zero in on the best lender/loan for your needs.

6. Finalize new loan details

Once approved, you’ll receive a new loan agreement outlining the exact refinanced loan amount, interest rate, monthly payments and repayment term details.

7. Close on your refinance

Your new lender distributes funds to pay off your current boat loan balance. You begin making payments to the new lender. It’s that easy!

Refinancing FAQs

Still have some questions about the boat loan refinancing process? Here are answers to a few commonly asked questions:

How soon can you refinance a boat loan after buying?

Most lenders require at least 3-6 months of on-time payments before they’ll consider a refi request. Some may want to see a full year of payments before refinancing.

Does refinancing a boat loan reset the clock?

Yes, when you refinance you start a brand new loan term/amortization schedule. Your remaining term starts back at the full length – for example, 15 or 20 years.

Can you add a co-borrower when refinancing?

If you didn’t have a co-signer originally, some lenders will allow you to add one to a refinanced loan. This can help those who need a cosigner to get approved and/or improve loan pricing.

Will refinancing hurt my credit score?

There may be a small temporary ding when applying, but if approved, a refi can help your credit. The higher loan amount plus additional years of on-time payments are favorable for your score.

How much does it cost to refinance a boat loan?

Closing costs for a refi often run $500 – $1,500. Costs include appraisal fees, document fees, title fees and more. Most lenders allow you to roll costs into the new loan balance.

The Bottom Line

The loan terms you needed when first buying your dream boat may not always fit your changing needs and budget. Refinancing offers boat owners flexibility and options for adjusting loan terms over time for maximum benefit.

With lower rates, more time to repay, or other customized changes, a boat loan refi can provide savings and peace of mind in owning your vessel long-term.