Setting sail on the water is a dream for many Americans. And in 2020, that dream became a reality for many new boat captains, as recent powerboat sales increased by 12% compared to 2019, according to the National Marine Manufacturers Association. With an average price of $37,000 for a traditional powerboat, many of these new boat owners likely needed a boat loan to purchase their vessel.
If you’re looking to hit the water, read on to learn your boat financing options and how to apply for a boat loan. Then check out an online lender marketplace like Credible for loan resources and find competitive rates tailored for you.
What is a boat loan?
If you’ve ever had a car loan, you already have a good idea of how a boat loan works. Both are installment loans for a specific loan amount. You pay fixed monthly payments, including interest, for the entire loan term.
But boats can be more expensive than vehicles, so many lenders offer extended repayment periods on boat loans – typically 15 to 20 years – to make monthly payments more affordable.
Whether you have bad credit or excellent credit, boat financing can be easy by using Credible's tools to complete your loan application. Depending on the lender, the loan processing and approval turnaround can be as soon as the same business day.
4 types of boat loans
No matter what type of vessel you want to buy, your boat financing options will include secured or unsecured loans.
1. Secured loans
A secured loan is a loan backed by collateral that protects the lender against financial loss if you don’t pay back the loan.
With the boat serving as collateral, a secured boat loan typically features lower interest rates than unsecured loans.
2. Unsecured loans
Since unsecured loans don’t collateralize your boat – or any other asset for that matter – lenders consider them to be riskier than secured loans. Accordingly, these loans come with higher interest rates and shorter repayment terms than their secured counterparts. Unsecured loans typically have stricter lending criteria, including an excellent credit score and stable income.
3. Home equity loans
A home equity loan is a type of second mortgage that uses your home as collateral. If you have equity in your home, you can withdraw some of it as a loan to complete your boat's purchase.
Because your property serves as collateral for the home equity loan, the interest rates are typically lower than unsecured loans. However, the lender can foreclose on your home if you default on your loan, which is a considerable risk you must consider.
4. Personal loan
You can use a personal loan for many purposes, including buying a boat. They are also unsecured loans, so you won’t have to offer your boat or another asset as collateral. Your qualification depends solely on your creditworthiness and income.
If this boat financing option appeals to you, Credible can easily help you find the right online lender, rate and loan term that fits your personal finance situation.
Who offers boat loans?
Banks, credit unions and boat dealers are familiar places to look for a boat loan. With a good credit score and sufficient income, you may find agreeable finance terms. However, traditional lending institutions aren’t your only option.
Online marketplace lenders provide another cost-effective method for boat financing. The Credible marketplace makes it easy to explore personal loan options and get answers from experienced loan officers.
What do you need to qualify for a boat loan?
Here are three steps to take to improve your chance of qualifying for a boat loan.
1. Check your credit
Before applying for a personal loan, check your credit scores, which you can often find for free in your online dashboards for your bank and credit card accounts. You can also pull your three major credit reports - for Equifax, Experian, and TransUnion – for free at AnnualCreditReport.com.
2. Dispute credit report errors
Review your reports carefully for discrepancies and mistakes and get them corrected right away. The Federal Trade Commission (FTC) reports one in four consumers identified errors on their credit scores which might affect their credit scores. Unfortunately, just one mistake can hurt your credit score and negatively impact your chances of boat loan approval.
With a credit monitoring service, you can get instant alerts on late payments, fraudulent activities, credit score changes and more. Check out some of Credible's partners here.
3. Prequalify for a boat loan
Prequalifying for a loan helps you determine the boat loan amount you may be able to afford. You can get prequalified at multiple lenders while you are shopping around for the best loan. Consider using Credible's tools for this step process as they can help simplify the loan application process for you.
Hitting the water in your very own boat is an unforgettable experience. But unless you’ve saved a boatload of cash, you are going to need a loan to make your boating dreams come true.
Getting the right boat loan for you starts with making sure you only borrow what you can comfortably repay. Use a personal loan calculator – like this one from Credible – to estimate your fixed monthly payments and see how they fit within your budget.
Before you commit to a loan or lender, compare the best personal loan interest rates, repayment terms and fees to make sure you are getting the best deal.
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