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Setting sail on your own boat is a priceless experience. But unless you’ve saved a boatload of cash, you’ll need a boat loan to make your dreams a reality.
Personal loans from banks, credit unions or online lenders can be used for nearly any purpose, including boats. The application process is typically fast, and approval is largely based on your credit score and ability to repay. While some lenders require the loan to be secured by the boat, they don’t require a down payment.
Before you jump in, consider that most financial experts don’t recommend personal loans for discretionary purposes, especially if you already carry credit card or other debt. If you take a personal loan, have a plan to pay it off.
Here’s how to finance a boat with a personal loan, where to find boat loans, how to determine the costs, and factors to consider before applying. In the end, if you decide a boat loan isn’t for you, consider alternatives that get you on the water debt-free.
How boat loans work
Boat loans are installment loans with fixed monthly payments typically over two to 15 years. 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.
Secured loans
Secured boat loans use the purchased boat as collateral. They may have higher loan limits, longer repayment terms and lower rates than unsecured loans. The risk is that you can lose your boat if you default.
Secured loans work best for borrowers who don’t qualify for an unsecured loan, want a higher loan amount, and are comfortable with the risk associated with secured loans.
Unsecured loans
An unsecured boat loan doesn’t use the boat or anything else as collateral. Without that backing, rates on unsecured loans may be higher and terms shorter.
You may not lose your boat if you default on an unsecured loan, but you’ll still face consequences, including a damaged credit score and wage garnishment if the lender takes you to court.
» MORE: Secured vs. unsecured personal loans
Where to get a boat loan
When considering boat loans from different lenders, use the loan’s annual percentage rate, which includes the interest rate plus fees, to compare costs and payments that fit your budget.
Online lenders
LightStream, the online lending division of SunTrust Bank, offers unsecured personal loans that can be used to buy or refinance a boat priced up to $100,000. The lender requires excellent credit to qualify for its lowest rates.
Banks
U.S. Bank has secured loans for both new and used boats, including sailboats, motorboats and yachts.
The bank sets a maximum loan amount of $150,000 for new boats and $99,999 for used boats. APRs range from 5.74% to 8.74% and include a rate discount of half a percentage point for borrowers who make automatic payments through a U.S. Bank checking account.
Wells Fargo offers secured loans up to $100,000 for new and used boats up to 26 feet long, including ski boats, pontoons and sailboats.
Wells Fargo’s secured loans have repayment terms of 12 months to 12 years. Customers who choose automatic payments from a Wells Fargo checking account may qualify for an interest rate discount.
USAA provides its members secured personal loans starting at $5,000 for new and used motorboats, fishing boats, pontoons, sailboats and yachts. APRs start at 5.75% for borrowers with excellent credit, including a small rate discount for automatic payments.
Credit unions
Credit unions are nonprofit lenders that may provide lower rates for borrowers with average or bad credit.
First Tech Federal Credit Union offers secured boat loans up to $500,000 for new or used boats up to 10 years old. Rates start at 5.34% APR, but are slightly higher for older models.
Navy Federal Credit Union provides its members with secured personal loans for boats and personal watercraft. Loans amounts start at $25,000, with starting rates of 6.05% APR for new boats with a loan term of up to 36 months.
Marine lending specialists
Marine lending specialists are financial service companies that act as brokers to find you a boat loan. They secure funding through outside sources, such as banks.
Boat loans from marine lenders have similar rates and repayment terms as personal loans. One advantage might be the ability to work with a specialist who understands the boating business, according to the National Marine Lenders Association.
However, these loans must be secured by the boat and require down payments from 10% to 20% of the purchase price.
Summary of personal loan options
Boat loan calculator
Use this calculator to estimate the cost of a boat loan. Enter your expected loan amount, desired repayment term and APR to see estimated monthly payments, interest costs and total payments.
Boat loans: Questions to ask before you apply
How does the loan fit into my budget? Monthly payments on a boat loan should fit comfortably within a budget that covers all of your needs, wants, debt payments and savings.
Payments toward the boat loan — combined with other debt payments and savings — shouldn’t exceed more than 20% of your income.
What is the true cost of boat ownership? Buying a boat isn’t your only new expense. Additional costs include fuel, licenses, insurance, storage, maintenance and repairs. Boats also depreciate over time, just like a car.
Are there loan prepayment penalties? Avoid boat loans that charge penalties for paying off the loan before the term ends.
Does my boat have resale value? It’s smart to buy a boat that is both affordable and popular, as this can attract potential buyers if you decide to sell it and pay off your loan at any point in the future.
Alternatives to taking a boat loan
If you can’t afford to buy a boat today, or you’re not quite ready to make the commitment, here are some alternatives.
Save up for the purchase. Consider holding off and starting a savings plan for your boat. You may be able to negotiate a cheaper price by paying with cash, and you’ll avoid paying interest on a loan.
Join a boat club. For a one-time fee and ongoing monthly or annual dues, boat clubs provide access to a fleet of boats for their members and guests.
Consider peer-to-peer rentals. Similar to renting a house on Airbnb, you can temporarily rent someone’s boat through a peer-to-peer rental marketplace, such as Boatsetter or GetMyBoat.