Buying a boat is an exciting prospect for many people who love spending time on the water. However boats can be quite expensive so most buyers need to finance their purchase with a boat loan. When you start shopping for boat financing, you’ll come across some key terms that are important to understand. In this article, I’ll explain the most common boat loan terms in simple language to help you make an informed decision when applying for financing.
Loan Amount
The loan amount is the total sum of money you wish to borrow to purchase your boat. Lenders will approve you for a maximum loan amount based on factors like your income, credit score, debt-to-income ratio and the value of the boat. The loan amount along with the interest rate, loan term and down payment determine your monthly payments.
Down Payment
The down payment is the portion of the boat’s purchase price that you pay upfront when you buy it. Lenders typically require a 10-20% down payment on a boat loan. The more you put down, the lower your monthly payments will be. If you make a down payment of 20% or more, you may even qualify for a lower interest rate.
Interest Rate
The interest rate is the cost of borrowing money expressed as a percentage of the loan amount. Interest accrues daily based on your outstanding principal balance. Boat loan interest rates can range from around 5-15% currently. The higher your credit score, the lower the rate you can qualify for.
Loan Term
The loan term refers to the length of time you have to repay the loan. Common boat loan terms are 10, 15 and 20 years. The longer the term, the lower your monthly payments will be. However, you’ll pay more interest over the life of the loan with a longer term.
Monthly Payment
Your monthly payment is the amount you pay each month to cover the principal, interest and any fees on your boat loan. The payment stays the same over the loan term on a fixed rate loan but can change with a variable rate loan. Use a boat loan calculator to estimate payments.
Fixed vs. Variable Interest Rates
A fixed rate keeps your interest rate locked in, so your monthly payments are predictable. A variable rate fluctuates based on market conditions. Your rate could go up or down over the loan term.
Prepayment Penalties
Some lenders charge a penalty fee if you pay off your boat loan early Make sure you understand any prepayment penalties before signing the loan agreement
Balloon Payment
On some boat loans, the final payment is much larger than the regular monthly payments. This is known as a balloon payment You typically have options to refinance the balloon payment rather than paying it in full.
Loan-to-Value (LTV) Ratio
The LTV ratio compares the loan amount to the value of the boat. Most lenders want to see an LTV of 80-90% or less. For example, if you borrow $20,000 for a $25,000 boat, your LTV is 80%.
Debt-to-Income Ratio
Your DTI compares your monthly debt payments to your gross monthly income. Lenders typically look for a DTI of 40% or less when approving boat loans. Keeping your DTI low improves your chances of approval.
Credit Score Requirements
Most lenders require credit scores of 680-720 or higher to qualify for a boat loan. Borrowers with excellent credit in the mid-700s and above can secure the very best rates. Check your credit reports before applying.
Secured vs. Unsecured Loan
A secured loan uses the boat as collateral, meaning the lender can repossess it if you default. An unsecured loan doesn’t use the boat as collateral but usually has higher rates.
Refinancing a Boat Loan
If interest rates drop significantly or your credit improves, you may be able to refinance for better terms. Refinancing involves taking out a new loan to pay off your existing boat loan.
Documentation Fees
Some lenders charge origination, application or processing fees to arrange the loan. Ask whether the lender charges these types of upfront fees.
Late Fees
Making a late payment typically incurs a late fee. The fee amount is usually specified in the loan agreement. Setup automatic payments to avoid late fees.
Insurance Requirements
Lenders require boat owners to carry adequate insurance. You’ll need to show proof of insurance before they’ll approve a loan.
Advanced Payments
Some lenders let you make additional principal payments each month to pay off your loan faster and reduce interest costs. Ask if your lender accepts advanced payments.
Escrow Accounts
With an escrow account, a portion of your monthly payment goes toward insurance premiums and property taxes. The lender manages the escrow account on your behalf.
Finance your dream boat
Working with leading marine lenders, our partners are able to offer competitive rates and terms to help you purchase a new boat or refinance your existing boat loan. We offer loans for powerboats, sailboats, multi-hull boats, pontoons, and even personal watercrafts.
Use our Boat Loan Calculator to determine a monthly payment that’s right for you, then fill out an Online Loan Application for our lending partner to underwrite.
- If you are applying for a loan for $25,000 or greater, click here to apply online.
Once your application is completed, a representative will evaluate the application to determine the next steps, in an effort to make the closing process as seamless as possible.
Calculate Payments with Our Boat Loans Calculator
Use our boat payment calculator to determine a monthly payment that you can afford when looking to finance a new or used boat.
Simply enter your desired amount, estimated interest rate, and the loan term over which you intend to pay back the loan. Once youve input the information, the calculator will generate your estimated monthly payment on your boat loan. Take this number and plug it into your current monthly budget.
Your Monthly Payment is:
Your Max Loan Amount is:
Boat Loans 101: Should You Finance A Boat?
FAQ
What is a typical boat loan term?
What is the monthly payment on a $30,000 boat?
|
Loan Amount
|
Loan Term (Years)
|
Estimated Fixed Monthly Payment*
|
|
$25,000
|
5
|
$514.57
|
|
$30,000
|
3
|
$926.18
|
|
$30,000
|
5
|
$608.15
|
|
$35,000
|
3
|
$1080.54
|
Can you get a 30 year loan on a boat?
How much are payments on a $50,000 boat?
What is a boat loan?
A boat loan is an installment loan with fixed monthly payments typically over two to 20 years. You can get a boat loan from a bank, credit union or online lender. Interest rates and loan terms vary based on the lender, the size of the loan, your credit score and income, and whether the loan is secured by the boat or unsecured.
How much does a $76,000 boat loan cost?
A $76,000 boat loan with a 5.49% interest rate over 20 years would have an estimated APR of 5.49% and 240 payments of $522.37. This online calculator can estimate the monthly payments you will need to make based on the loan amount, interest rate, and loan term you select.
How much does a short term boat loan cost?
Shorter terms, such as four years, have higher monthly payments but less interest. For example, a $30,000 boat loan with an annual percentage rate of 15% and a four-year term will cost $10,076 in interest. The same loan with an eight-year repayment term will cost $21,683 in interest.
How long do boat loans typically last?
Boat loans typically last between two and 20 years. Unsecured boat loans usually have repayment terms of about two to seven years, while secured boat loans have longer terms.