Many individuals find themselves relying on boat loans in order to finance their purchase. However, the typical loan on a new or used boat has an amortization schedule lasting between seven and 20 years in length. This means that when buying a boat, the loan terms you choose today could potentially follow you for decades to come. 

But what if you later decide that those agreed terms don’t work for you, or find that you could potentially save yourself a lot of money by adjusting your interest rate. Are there any options for changing your terms or can you refinance a boat loan into a new agreement with more advantageous terms?

Here’s a look at whether or not you can refinance boat loans, what the benefits of a boat refinance would be, and what to expect along the way.  

Can You Refinance a Boat Loan?

Even though boat loans can last many years, you also have the option to refinance your boat loan before you reach the end of your agreed loan period. A boat loan refinance, also called a boat refi, may be offered by your current lender or a new one, and serves to pay off and replace your existing loan. 

Rather than continuing to make scheduled payments to your original lender, after refinancing you will make payments to your refinance lender on your new loan. This may mean that you have a new monthly payment, new interest rate, new loan period, or all three. 

“But can I refinance my boat loan at any time?” you may be asking. There is no clear cut rule regarding when you can refinance a boat loan. However, many lenders will want to see that you’ve made on-time payments for at least three consecutive months (and that those payments have been reported to the credit bureaus) before they’ll approve a refinance. Some lenders may require more time (six months or longer) while others may be willing to refinance your loan immediately after you complete your boat purchase. 

Benefits of Refinancing a Boat Loan

There are many benefits to refinancing an existing boat loan, which can lead many boat owners to consider a refi. Here are some of the top reasons you may think about refinancing.

You can lock in a lower interest rate. In most cases, boat loans have fixed interest rates, which means that your APR won’t change over time even if benchmark rates come down across the market. Rather than continue paying a higher interest rate than you have to, this process can allow you to lock in lower refinance boat loan rates — and save considerable money over the remaining repayment of your vessel.

You can adjust your monthly payment obligation. You may very well have a boat loan term that is many years or even decades long. It would stand to reason that over the course of your repayment, your household budget could shift in some way. Maybe you’re aggressively saving for a big purchase or to start a new business, or your cash flow isn’t what it once was.

Even if this occurs, though, you are still required to continue making your boat loan payments as scheduled. If you fail to do so, you risk defaulting on your loan… which would result in losing the boat and wrecking your credit. 

If you find yourself needing to change your monthly boat loan payment at any point, a refinance may be able to help. With a refi, you could potentially lower your interest rate and/or reset your loan repayment term. Either of these options can reduce your monthly payment without penalty, and ensure that your boat still fits into your household budget.

You can remove a co-borrower. There are many reasons why you may want to remove a co-borrower later down the line. Maybe you only added a co-signer to lock in a better interest rate and loan terms, but now want to release them from the obligation of that debt. Or maybe you purchased the boat with a spouse, friend, business partner, etc. and now need to shift the boat (and loan) into your name only.

While some lenders may allow for a cosigner release if your account is in good standing, most will not. In this case, a refinance is usually the best way to remove someone else from the debt. As long as you qualify for a new loan on your own, you’ll be able to shift a co-signed boat loan into a new, refinanced loan where you are the only borrower.

You can get out of debt sooner. There are many ways to pay off your boat loan sooner, such as making extra payments toward your principal each month (assuming your lender doesn’t have a pre-payment penalty). However, another great option — which doesn’t involve any additional funds out of your pocket — is to refinance into a better loan.

If you lower your interest rate with a boat loan refi, but keep the same remaining loan term, your monthly payment will decrease and you’ll pay off the debt in the same amount of time. However, if you lower your interest rate with a refi but keep your monthly payments the same, you’ll automatically be paying more toward the principal balance each month. This will serve to get you out of debt sooner (and for less money).

When to Refinance Your Boat Loan

So, you know that a boat loan refi is possible and we’ve already outlined some of the reasons that you might consider one. But when is the best time to think about refinancing your boat loan? 

You should consider a refinance:

  • When market interest rates drop — The interest rate you’re offered is, in part, based on whatever the benchmark interest rates are at the time the loan is issued. If rates drop considerably after you buy your boat, you might want to consider refinancing into a lower-cost loan. 
  • If you need to adjust your monthly payment — If you decide that your existing boat payment no longer works for your monthly budget, the best way to change it is to refinance your boat loan. This can help you lower your obligation without defaulting on your loan.
  • If you need to remove a co-borrower from the loan — If you need to assume ownership of the boat and sole obligation of the remaining debt, removing a co-signer often requires a refinance. You will take out a new loan without the previous co-borrower.
  • When your credit score improves — Your interest rate on your boat loan is largely dependent on your personal qualifications, such as your credit history. If your credit score improves significantly after taking out a boat loan, you may be able to qualify for an even lower interest rate by refinancing. This would, in turn, save you money over the life of your loan.

How to Refinance a Boat Loan

If you think that a refinance loan makes sense for your situation (and your boat loan!), here’s how to start the process.

1. Check your credit

First, it can help if you know where your credit score stands. You can request a free credit report from each of the three credit bureaus (Transunion, Experian, and Equifax) once a year through AnnualCreditReport.com. (Just note that this is the only government-approved site for free credit scores, so watch out for lookalikes.)

Go through each credit report and check for any errors before you apply for your new refinance loan. If you find any discrepancies, be sure to report them to the creditor and the reporting bureau.

2. Determine what you need from your new loan

Is your goal to reduce your interest rate? Remove a co-borrower? Lower your monthly payment? Knowing what you want your new refinance loan to look like can help you initiate your search and find the right lender (and loan terms) for you.

You may want to play around with a boat loan calculator to see what your monthly payment options could be and what new loan terms would fit your needs.

3. Apply for your refinance

Now it’s time to formally apply for your refi loan. You’ll be expected to provide the lender with certain personal information as part of the application process. This includes things like your name, date of birth, contact information, address, and Social Security number. 

Most lenders will also want to know certain details about your boat and existing loan. This could include your:

  • Boat’s age (model year)
  • Boat manufacturer and model
  • Remaining loan balance
  • Boat type
  • Number of engines
  • Existing lender

Once you’ve provided all of this information, your boat loan application will be reviewed.

4. Proceed with your new loan

If approved, you’ll need to sign a loan agreement outlining your new loan terms. The new loan will then be used to pay off your existing boat loan balance; if your refi loan is through a new lender, they will become the lienholder on your boat. 

From then on, your monthly payments will be made to your new loan until the debt is repaid.

Bottom Line

For many sportsmen, taking out a loan is a helpful — and sometimes necessary — step toward boat ownership, whether you’re buying a boat that costs $25,000 or one with a $2 million price tag. However, the boat loan terms you agree to on purchase day might not be the right ones a few years down the line. Whether you’re interested in lowering your interest rate, need to change your monthly payment obligation, or are trying to remove a co-borrower from the loan, refinancing is often the answer.