How Long Can You Finance a Boat – Up to 20 Years

In contrast to car loans, boat loans have terms that can last up to 20 years, or almost as long as a mortgage. The cost of the boat, which can range from a brand-new jon boat for under $5,000 to million-dollar yachts, is one of many variables that determine whether you should borrow for that length of time. The shortest loans typically have the lowest interest rates, but your monthly payments would be higher.

How Long Can I Finance a Boat?

Longer finance terms are available for boat loans because they retain value in relation to their original purchase price much better than automobiles. Depending on the price of the boat, most loans last between 120 and 240 months.

According to Consumer Reports, most 25-year-old boats are still in use while the average new car lasts 8 years or 150,000 miles. A 72 or 84 month auto loan is riskier than a longer term boat loan in terms of average useful life.

Many clients view longer-term boat loans as leases. Recreational boating hardly ever involves leasing. Most customers can purchase a new boat with a 240 month term and walk away in 3-5 years without being “backwards”. In other words, since the boat’s current value is less than the loan balance, they can sell or trade it without having to pay more to pay off the existing loan.

All of the boat loans we provide have fixed rates and no early payment fees. Many of our customers opt for a longer loan term so that they have a lower required monthly payment and can then choose to pay more as they please. This gives the buyer more options.

Interest rates are at an all-time low level right now, and the market has been doing well. Many savvy consumers who can afford to pay cash have financed their boat purchases during these trying times and have left their money on the market. It makes financial sense to take out the loan for the boat if the interest rate is 4.75% but you are earning twice that much from investments. If/when the market return decreases, you can repay the loan without incurring any fees.

While it is true that the longer you hold a loan, the more interest you will pay, you should also take other factors into account when determining what is best for you and your family, such as warranty coverage, the opportunity costs of using your money elsewhere, and the price/value of owning a newer boat.

Where to Find a Boat Loan

Where you find financing may also affect how long you can finance a boat. Here are some of the main venues where you’ll be able to find boat loans:

Dealer financing. According to Jim Coburn, a principal at Coburn Consulting Company and a member of the Michigan Boating Industries Association, dealerships handle about 80% of transactions for financing new boats. “Banks have relationships with dealerships and dealerships have the customers,” he said. “They suggest banks to the boat loan clients.”

online lenders, credit unions, and banks. a large portion of the remaining 20% of U.S. boat loans takes place directly through the lenders themselves. As of publication, we found APRs as low as 4.29% at online lenders LightStream, a division of SunTrust Bank, and Essex Credit, a division of Bank of the West, during our research into rates from top boat lenders. Additionally, credit unions and your own bank might have competitive rates available and may even give current customers a discount.

Marine brokers. According to the National Marine Lenders Association, these sources are typically involved when you buy a used boat. Brokers put you in touch with the seller, assist you in finding the ideal boat for your needs, handle the sale, and facilitate the purchase. While many brokers represent sellers, they also provide buyer services like connecting you with financing options and keeping deposits in separate bank accounts in escrow. If you choose to work with a buyer’s broker, they will act as your advocate and not the seller’s, assisting you in finding the ideal boat for your requirements and price range.

Shop around. Make sure you are paying what the boat is worth if you do decide to purchase a used boat. To find out values and costs in your region, check out a market resource like NADAGuides. It’s critical that you comparison-shop to examine rates and boat loan conditions from a range of lenders as you try to decide which financing option is best for you, whether the vehicle is used or new.

Types of Boat Loans

The amount of the loan, the credit score of the borrower, and whether the vessel is new or used all affect rates. Approximately 5% to 7% is the range of prime loan rates for borrowers with the best credit, according to Coburn. Term lengths range from 15 to 20 years; for instance, if your loan is in the $25,000 to $50,000 range, you might be able to finance it for 15 years. Longer boat loan terms are frequently associated with larger loan amounts. Remember that many lenders require a down payment, which is typically between 15% and 20%.

These are some of the more widely used types of boat loans:

Fixed rate. Many boat buyers decide to fix the price and make their budget more stable. “Fixed is by far the most popular and most widely used type of loan out there today,” Coburn said.

Adjustable rate. If you are confident that you can withstand interest rate changes over time, you might be able to secure a competitive loan that offers a low introductory rate followed by one that adjusts in accordance with interest rate indexes. There are also boat loans that include a lump sum “balloon” payment at the end. Just be sure to double-check how long your rate is fixed before it becomes adjustable or, in the case of a balloon loan, that you can afford the payoff sum at the end of your term.

Factors That Effect Boat Financing Terms

You must understand, however, that those other factors we mentioned earlier can also be impacted by the length of time you finance a boat. A lender might request a slightly higher interest rate or a down payment that is a higher proportion of the boat’s value, for example, if you double the term of a loan. When deciding how long of a loan term they will be willing to consider, a lender may also take into account some other factors. These commonly include:

• The size of the loan
• The type of boat
• The age of the boat, if it’s used

Boat Loan Size

The size of the loan has a significant impact on how long the lender is willing to extend the loan. As a general rule, a loan can be financed for a longer period of time the larger it is. A lot of lenders will have minimum loan amounts for various distinct term lengths.

Type of Boat

The majority of contemporary powerboats can be grouped together, but there are some outliers that lenders will treat differently.

• High performance boats or boats with wood hulls, for instance, might be handled differently.
• Lenders vary in their treatment of multi-hull or pontoon boats as well as their distinction between sailboats and powerboats in general.
• Liveaboards are a significant issue that occasionally surfaces. Loans for liveaboards are handled very differently than regular boat loans and some lenders won’t make them at all because of the laws relating to residences, home ownership, and home ownership escrow accounts.

Used Boat Age

The term length that a lender will accept greatly depends on the age of the boat. In almost all cases, you can get a boat loan for a longer period of time the newer the boat is. Many lenders place a limit on how old a boat can be before even considering it when making a loan, while others only work with brand-new boats.

When purchasing used, you should also be prepared for the possibility that additional loan conditions may alter. For example, some lenders may have higher minimum loan amounts or different finance rates for boats made before a particular model year.

Alternatives to Boat Loans

There are alternative ways to finance your boat purchase if you’d prefer not to take the conventional path or if your credit is problematic. These include:

a line of credit or loan for home equity. Since your home is used as collateral for these loans, you might be able to find favorable interest rates. APRs for $25,000 HELOCs and home equity loans were available for 6% at the time of publication, which was a little higher than Essex Credit’s 5.59% APR. However, a home equity loan has the benefit of typically fixed rates. You should be aware that you run the risk of losing your home if you borrow against the equity in your home to make a luxury purchase. Additionally, you might have to pay expensive closing costs and other fees, though some lenders will waive these charges.

Typical home equity loan terms range from five to fifteen years, which might be too long for a boat that is relatively inexpensive. HELOC terms can range from one to twenty years, though. Although interest rates may fluctuate, one benefit of a HELOC is that you only pay interest on the amount you borrow. To learn more about home equity loans versus HELOCs, click here. A FICO score of at least 680 is typically required to be eligible for either a home equity loan or a HELOC, so keep in mind that good credit is essential in this situation.

Personal loans. Unsecured personal loans are available from many lenders, making it simple to compare them and choose the best one for you. If your credit is good, you might be eligible for a low interest rate, and since the boat isn’t used as collateral for the loan, the lender cannot seize it if you default. But keep in mind that if you default, your credit will still suffer. In addition, you might be hit with high interest rates if your credit is less-than-perfect, in addition to the exorbitant origination fees that some lenders impose. The typical personal loan term is between two and five years, so if you borrow a significant sum, you might find it difficult to repay it in that time.

For borrowers with poor credit, secured personal loans might be a better option. These loans, which are secured by collateral and can be seized if you default on the loan, are not unsecured loans.

Subprime loans. For those who have trouble obtaining financing through other channels, a small number of lenders offer personal subprime loans. “Those are (for) people with bad credit, scarred credit, if you will,” Coburn said. “They now have a chance to obtain a loan, typically with stricter terms.”

Cash payment. Cash is accepted almost everywhere, including boat dealers, if you have the means. The best part is that paying cash avoids the need for a credit check, but it might necessitate giving up on yacht dreams in favor of a less expensive boat. Choosing the best kind of boat for your requirements: a boat for a large group or a boat for two, saltwater or freshwater? — will help you determine a budget.

The Bottom Line on Boat Loan Terms

If you’re financing a boat, keep in mind that your options depend on your financial situation. As with any loan, those with good credit and a sizable amount of extra cash will be offered more favourable boat loan terms than those with less-than-ideal credit and a limited spending plan. The underwriting requirements for financing a luxury item, such as a boat, may generally be higher than those for a car or house.

A few things to be aware of:

• It’s not a given that you will be able to meet the obligation over the long run just because you were approved for a loan and can put money down. Make sure to review your budget and maintain reality.
• Check your credit before applying for a loan, settle other debt, and get prequalified to find out the precise amount you’ll be approved for.
• Stay away from risky situations. Although it may be tempting, it is better to make sure you can afford the payments before giving in to the urge to purchase a boat.

Boat Loan FAQ