You may have been shopping for a boat for a while or you’re just getting your feet wet. Either way, you know you want to get out on the water and enjoy the sunshine and balmy breezes as soon as possible. Nothing says summer quite like owning your very own boat! You don’t need to make a reservation to rent a boat, or worry if one will be available. And now you don’t have to keep asking your buddy to go out on his boat. Nope, you will have your very own watercraft! 

Whether you’re in the market for a used fishing boat, a deck boat, a brand new, fully equipped jet boat, or a beautiful yacht, you’re probably going to want some help paying for this luxury purchase.  Instead of paying the full cost of the boat upfront and also having to cough up extra money for things like insurance, marina and docking fees, inspections, and so on, why not, save your money, and get a boat loan. With a boat loan, you don’t need to pay for 100 percent of the cost of the boat upfront, instead you typically give a down payment of 10 to 30 percent and finance the remaining amount. Lenders offer various boat loan terms, interest rates, and monthly payments.

Check out a boat loan calculator to get an estimate of your monthly payments and interest rates and then apply for a boat loan with Trident Funding online. It only takes a few minutes. You will speak to a knowledgeable sales rep and they will help you get matched with a marine lender based on your individual financing needs. Trident Funding has almost thirty years of marine lending experience and they are a reputable company that gives time and attention to each customer. If you really want to up your fun factor, they also offer recreational vehicle and airplane loans. But, let’s start with a boat loan. 

How a Boat Loan Works 

A boat loan is structured similarly to an auto loan but it often has longer terms like a home mortgage. A boat loan typically requires a down payment from the borrower and the boat serves as the collateral for the lender. There is a specified loan amount and monthly payments are made up of principal and interest. They are amortized over the length of the loan. Most boat loans have fixed interest rates, but you may come across shorter-term loans with variable rates as well. Fixed rates give you more security because your rate will never change, but variable rates may entice you with a lower rate now, and then end up being higher later. 

Boat Loan Terms

The length of the loan is referred to as the term, and boat loan terms usually range from seven to 20 years. Typically, the higher the loan amount, the longer loan term you will qualify for. If you’re purchasing a $50,000 boat, your term will likely be around seven years or so. However, if you’re buying a $2 million boat, your term is more likely to be around fifteen to twenty years. This gives you more time to pay off the boat which makes your monthly payments more manageable.  

Boat loan terms are generally based on the following factors:

  • Age of the boat
  • Loan amount
  • Borrower’s credit score and credit history
  • Borrower’s down payment
  • Borrower’s overall financial profile

Boat loan terms are longer than they used to be because boats are built better and are built to last now. They tend to depreciate slowly, meaning the lender’s collateral (the boat) still holds its value relatively well during the entire loan term. So, the lender can feel confident giving a borrower a twenty year loan term, knowing the boat won’t have depreciated too much during that period. 

Boat Loan Conditions

In addition to boat loan terms, there are other loan conditions which include the minimum and maximum loan amount. Trident Funding offers boat and yacht financing from $25,000 to $2 million. The age of the boat and whether or not it is new or used will also factor into the loan approval decision. Another condition of the loan may be the amount of the down payment and a minimum credit score requirement. A minimum down payment is usually 10% and the minimum credit score to be considered for a boat loan is usually 680. 

Other conditions may include proof of income, employment history, and proof of assets and debts. Some loans may also require proof of residency or citizenship. Lenders also consider your debt-to-income ratio during the boat loan approval process. Additional considerations include proof of boat insurance and naming the lender as the lienholder on the insurance policy. 

Keep in mind that many lenders charge origination fees and you may also be responsible for late fees and prepayment penalties. Closing costs and taxes are also additional fees that need to be paid. Additionally, the lender may want to see some money in reserves to cover a few months of boat loan payments.  Lenders offer the best boat loan terms and conditions to the borrowers that are deemed to be the lowest risk, meaning they are the most creditworthy. 

Boat Loan Interest Rates

Interest rates on boat loans fluctuate with the market, inflation, and treasury bonds, as well as supply and demand. Rates are also based on the borrower’s credit score and overall financial profile. Lenders offer the best rates to the borrowers with the highest credit scores. As of July 2022, boat loan rates typically start around 5.24%. 

Additional Boat Expenses 

You know how much a boat loan is going to cost you but that’s not your only cost. Boat expenses can really add up and catch you off guard. Here are some additional boat expenses to be aware of:

  • Boat insurance: required with all boat loans
  • Towing: recommended and often can be added onto your boat insurance policy 
  • Trailer: Good to transport smaller boats
  • Storage: You may store the boat in your garage, but if that’s not the case, you will need to choose wet or dry storage and will need to pay marina and storage fees
  • Docking fees: Want to dock at that yacht club or that waterfront restaurant or leave your boat at a marina overnight? There may be docking fees involved
  • Maintenance and repairs: Boats need to be regularly cleaned, maintained, and serviced. Keep on top of repairs so they don’t end up costing you more in the long run
  • Registration: Rules and regulations vary by state
  • Fuel
  • Crew: If you want a full-time or part-time crew or even just an occasional captain, be sure to factor in these wages
  • Coolers, ice, food, and water: Supplies to keep you and your guests nourished and hydrated
  • Equipment: All used boats may not come equipped with life jackets and first aid kits. It’s your responsibility as the boat owner to ensure there are always enough life jackets on board for all passengers including the right sizes for children. You may also need to purchase things like fenders to minimize scratching the boat when docking. 

Boat Loan Terms and Conditions: The Wrap Up

Now you know more about boat loan terms and conditions, check out a boat loan calculator to see what you can afford and how much your estimated monthly payment will be. Remember that boat loan terms and conditions vary by lender and are dependent on a lot of factors including your credit history, income, credit score, and the age, and price of the boat.