You’ve made the decision and have decided to live out one of your major life goals….being a boat or yacht owner! Wow! Congratulations are in order! If you’re ready to secure financing, learn how we do boat loans at Trident Funding. A boat is a big purchase, in fact it’s usually the second largest purchase people ever make, second only to their primary residence. Most people who buy boats will get a loan to fund this major purchase. This frees up cash for other things such as boat maintenance, repairs, storage, water toys, insurance, and all the other expenses that come along with being a boat owner. 

1. How Boat Loans Work

2. What to Do When Getting a Boat Loan

3. What to Avoid When Getting a Boat Loan

4. Pros and Cons of Getting a Boat Loan

5. Alternatives to Boat Loans


How Boat Loans Work  

If you’re new to the boat financing process, you may wonder how boat loans work. There are a few important things you should know right up front. A boat loan works much like an auto loan but for a longer time period. Typically, boat loan terms range from seven to 20 years. This is the length of the loan and the time period you have to pay off the loan. 

This boat loan term is determined by a number of factors including the borrower’s credit score, the age of the boat, and the cost of the vessel. Typically, more expensive boats have longer loan terms, which make the monthly payments more affordable because they’re spread out over a longer period of time. For example, a $1 million yacht may have a 20-year loan term and a $50,000 fishing boat may only have a 7-year loan term. 

If you’re a well qualified buyer with a good credit score, you may have some say over your loan term. If you can manage higher monthly payments and want to pay the loan off as quickly as possible to avoid extra interest, then you can choose a shorter term. And vice-versa, if you want your monthly payments as low as possible, you may want to choose the longest term available. 

In addition to loan terms, you should also know about a boat loan rate. This is the interest rate, you, the borrower, are being charged to borrow money from the lender to purchase the boat. You’re agreeing to pay back the loan amount plus the agreed upon interest during the loan term. 

The boat serves as collateral for the lender, in the unlikely event that you don’t pay back the loan, and nothing can be worked out. Boat loan rates vary by market conditions, the age and price of the boat, as well as the borrower’s credit score, and overall financial profile. As of January 2023, Trident Funding offers rates starting at 6.74% for well qualified borrowers with great credit scores. 

What to Do When Getting a Boat Loan

We know you can’t wait to get out on the water and sail/motor away! But, before this happens, you need to do a few things to prepare yourself for getting a boat loan. Do, know your credit score, your credit history, and if you have any late payments. You may need to explain the reason for them to the lender. Do, choose a reliable lender who can get you the most competitive rates and terms, and isn’t going to disappear on you once your application has been turned in. 

Trident Funding has been a leader in marine financing for over 30 years and will guide you through the entire process while matching you to a boat loan that best suits your needs and your budget. 

Do, show where your income is coming from, whether it be from a side hustle, an inheritance, your business, or your job, the lender will want to see proof of income. You should also get all of your financial documents organized and keep them handy so the process goes as quickly and smoothly as possible. 

What to Avoid When Getting a Boat Loan 

Let’s discuss some things to avoid when getting a boat loan. You don’t want to change anything about your finances, employment, or debt-to-income ratio. Basically, hold off on any major purchases until after closing and after you own the boat. Don’t max out credit cards, skip payments, or do anything that could adversely affect your credit score. 

If you currently work as a healthcare executive, but were just offered a position in a completely different industry, try to hold off until after you get the boat loan. Most lenders want to see at least two years of employment history in the same industry. If you have any specific questions on loan requirements, chat with one of our knowledgeable reps to get your questions answered. 

Another thing that people don’t often think of is, don’t apply for any new credit inquiries. Even if that store credit card is appealing and you just want to see if you’re approved, stop yourself, until after you buy the boat. The lender wants your credit to be the same or better than it was during your initial loan application. 

Your credit score shouldn’t drop, you shouldn’t have any new late payments, or credit inquiries, and your debt-to-income ratio shouldn’t increase. Also, be careful with over-spending even if it’s with cash. Extra expenses always come up when you own a boat and you want to have cash on hand to pay for them. For example, you may need to buy all new life jackets, fenders, a trailer, or even buy gas after your first time taking the boat out of the marina. 

Now you know what not to do when getting a boat loan, you should also know some don’ts of the boat loans themselves. 

  • Don’t sign anything without reading it
  • Don’t forget about the fees, insurance, registration, inspection, and storage costs that come along with owning a boat 
  • Don’t assume your interest rate will be the advertised rate
  • Don’t feel pressured to go with the first loan that is offered to you
  • Don’t be unaware of your monthly payments. Use a boat loan calculator to at least get an estimate of what your payment will look like. 
  • Don’t be buoyed down with stress. Instead, know exactly what the loan will cost you. 

Pros and Cons of Getting a Boat Loan 

Some of the pros of getting a boat loan include:

  • Lower initial investment: Come up with just a downpayment instead of the entire cost of the boat 
  • Invest the money you saved by not paying for the boat entirely out of pocket
  • A good lender will help you through the entire purchasing process. This is especially helpful for first time boat owners who would be navigating this alone if not for a boat loan
  • You may be able to afford a newer and nicer boat if you get a boat loan than if you pay cash for the boat 
  • Can be considered a positive tradeline if the boat loan is paid on time each month 

Cons of getting a boat loan include: 

  • Potential lender fees including origination fees and late fees
  • You will pay interest over the life of the loan
  • You’re adding another credit line which can be positive and negative
  • It will increase your debt-to-income ratio 

Alternatives to Boat Loans

There are a number of reasons why you may not want to get a boat loan or aren’t able to do so at the moment, because of your low credit score, lack of consistent employment, or insufficient credit history. But, you still want to buy a boat, so let’s explore some alternatives to getting a boat loan.

Instead of using a boat loan, you could: 

  • Purchase a boat outright for cash
  • Work out a deal with the boat seller: Seller/owner financing
  • Borrow the money from friends or family
  • Purchase a boat jointly with someone else to lessen the financial burden
  • Rent a boat or participate in a boat share membership program 
  • Wait to purchase the boat until you meet the boat loan financing criteria

If you’re not sure if you qualify for a boat loan, check out Trident Funding, and in just a few minutes, you can fill out our loan application, and find out if you can get pre-qualified. You can also use the boat loan calculator to see how much boat you can afford and your estimated monthly payment. 

Dos and Don’ts of Boat Loans: The Wrap Up

Now you know the dos and don’ts of boat loans, remember to keep a clear head, and choose the loan that best works for your financial situation. Know your monthly payment, your boat loan rate, and your term, and any other fees you’re responsible for. Don’t make any major employment or financial changes during the financing process, and don’t sign any loan documents before reading them. Enjoy the process as much as possible because it will lead to clear skies and wide open seas in no time!

Dos & Dont’s of Boat Loans: Frequently Asked Questions 

What Should I Not Do When Buying a Boat?

As we mentioned above, it’s important not to make any large purchases during the boat loan process. This is the same rule that applies when purchasing a house or financing a car. You may want to go crazy on decorating your boat or spend thousands on stocking your boat with expensive champagne and delicious treats, but save all of that until after you have purchased the boat. 

The lender will be checking your credit score and debt-to-income ratio throughout the boat loan approval process, and you don’t want to be denied a loan on your dream boat because you couldn’t keep your credit card in your wallet. Avoid the sinking feeling of a denial, and look forward to sailing away on your new vessel by following our tips on the dos and don’ts of boat loans. 

Is a Boat Loan Right For Me? 

A boat loan is typically right for you if you have a credit score that is considered good or higher, typically at least 680 or above, you have steady employment or own a successful business, and you have a positive history of making payments on time. It’s also right for you if you have enough money for a downpayment, think 10% to about 30% as a typical downpayment amount. If you meet that basic criteria, check out the boat loan calculator to see approximately how much your monthly payment will be and then apply for a boat loan

How Do I Choose a Boat Loan and a Lender? 

When choosing a boat loan, you want to consider the following:

  • A reputable lender that has years of marine industry experience
  • Helpful and knowledgeable customer service
  • Competitive rates and boat loan terms 
  • Loan amounts: Does the lender offer loans for the boat you’re looking for? For example, some lenders don’t finance boats over $500,000 or under $100,000. Trident Funding offers boat loans from $25,000 to $2 million. 
  • Additional services: Does the lender help guide you through the application, purchasing, inspection, and closing process? 

What To Avoid When Choosing Boat Loans?

If you know you need a boat loan to purchase your boat, and you want to compare loan products, there are a few red flags to be aware of. First, check out the lender, their website, and their overall reviews. Don’t choose a fly by night company, choose one that has been in business for years and knows the marine finance industry. Trident Funding has over three decades of experience and you can apply for our loans online

Don’t just go by the average interest rate advertised on the lender’s website. Instead, know your credit score, the loan amount being offered, if you have a credit approval, and what your unique boat loan rate will be. Some sites will advertise a low introductory rate, but you may qualify for a rate that is much higher. Know all of the costs of financing a boat upfront, so there are no expensive surprises down the road.