The Definitive Guide to Getting the Best Boat Loan (2020)

Written by Carolyn Jackson & Myril Shaw

Introduction to Boat Financing and Loans

The refreshing feel of an ocean breeze against your face. The feeling of summer when you get on the lake for the first time of the season. Boating brings us so much joy; at Rollick, our goal is to help you turn that dream into a reality. If you’re looking to experience the water with a new or used boat, this guide to financing will help get you across the finish line.  As a prospective boat buyer, your goal is to buy your boat at a reasonable price, and since the average price of a new boat is $42,000 odds are you’ll need a loan to help you afford your new boat.
 
In this guide, we will cover some of the nuances of boat financing that differ from financing a car or a house. We will also go over some tricks of the trade and what to expect when you get to this place in the boat buying process.
 

Getting Started

The boat buying process can be intimidating, but don’t be discouraged; dealers and manufacturers do a fantastic job at making the boat buying process as painless as possible. There are a few considerations to be aware of that are unique to owning a boat.
 

• A boat is a recreational product, so it’s important to have a strong understanding of your finances to ensure you will be approved for a loan and that you’ll be able to afford the interest payments throughout the life of the loan.

 

• Know your credit score before speaking to a lender. There are a number of free websites you can use to find your credit score, such as Credit Karma or NerdWallet. This is important because the better credit score you have, the lower interest rate you will get. Do you have low credit? Check out our low credit financing guide, which will help you think through ways to get approved for your boat loan.

 

• Since boats are typically on the water, you might want to invest in on-land storage options to ensure that the resale value of your boat is as high as possible. This is particularly helpful when you have a loan.

 

Where Do You Get a Boat Loan?

The number one rule of financing is to do your research and get quotes from multiple institutions. By having different quotes, you’ll feel better about deciding on which lender is best for you.
 
Finding the lowest interest rate is typically your number one goal, but convenience and customer service are also important. This is why dealer financing can be particularly attractive because they already have relationships with many institutions, making the process easier for you. You can also read reviews of lenders on sites like Bankrate and NerdWallet to help you understand the quality of the bank you’ll be working with.
 
Don’t stress about multiple credit inquiries affecting your score either. If you make the inquiries (for the same loan) within a 30-day time period, it will not affect your credit score for each inquiry.
 
There are four types of lenders you can get a boat loan through:
 

• Dealer Financing
  • 80% of boat buyers actually acquire their financing through the boat dealership. Dealers are experts in helping their customers get great loans and work with them throughout the loan process. Dealers can take credit applications, source lenders, help you with the best protective products to ensure your lifestyle and make the paperwork process as easy as possible. Dealers typically work with the manufacturer’s financing group, but they often work with a number of lenders and can be an excellent option to help find the most competitive loan rate.

   

  • It’s worth noting that dealers have the same mission as you – get the best payment you can on the best terms you can as easily as possible.  They have access to multiple lending sources and will shop your information to help you get the best comprehensive terms possible

 

• Banks
  • Banks’ loan policies are usually on the more cautious side, and some may only work with customers who have exceptional credit, but they are able to offer very competitive interest rates. Most banks have websites that make it easy to check their current loan rates, and shoppers can apply for a loan either online or at a local branch. Visiting the branch is a good way to avoid any mistakes or misunderstandings and might result in an even better offer.

 

• Captive Lenders

• • Captive lenders are financial institutions that have an exclusive (or mostly exclusive) relationship with manufacturers. In most cases in the marine industry, they are independent banks, like Synchrony Financial. These lenders often have attractive incentives to help you get started with a loan. When you see ‘zero-percent financing for the first 12 months’, that’s usually a captive lender subsidizing the loan rate.

 

• Credit Unions
  • Credit unions are typically non-profits owned by their members. Credit Unions have a lower operating cost than banks because they have fewer offerings. They are usually local institutions and only lend money to members. However, some will make loans to people who don’t have deposit accounts with them.
     
    • Pro Tip: Credit Unions typically have better loan rates than traditional banks, so you should consider your local credit union as an option Furthermore, credit unions are less fussy about credit scores.

 
There are some banks and third-party lenders that are known for working with boat loans.

1. KeyBank
2. WellsFargo
3. SunTrust
4. Synchrony
5. Essex

 

What to Expect When Inquiring About Boat Loans

Lenders will inquire about your credit score, your net worth, your home and employment status and debt to income ratio. You can also expect the lender to ask for proof of income through a W2 or recent paystubs. Although all of these factors are important when attempting to get approved for a loan, the most important is your interest rate. Rates at 650 or above should have no issue securing financing, but if you inch below the 650 mark, you might have to have above-average scores in the other areas lenders check or you can expect a higher interest rate.
 

How Much Do I Need to Put Down on a Boat?

When purchasing a boat you should expect to put down at least 10% of the total boat cost upfront and in the 15%-20% range for the higher-end boats. Less than 10% down is possible for boats under $50K.
 

How Long are Boat Loans?

Unlike car loans, which typically last anywhere from 3-7 years, on average, boat loans are more similar to a home loan in length. You can expect boat loans to be in the 15-20 year range. The higher the cost of the boat and the less you put towards the down payment, the longer your loan term will be. However, shorter-term boat loans definitely exist. It is possible to get loans with a 24-87 month length, especially if the boat you’re purchasing is in a lower pricing tier, such as in between $10,000 and $50,000.
 

What is the Average Interest Rate for a Boat Loan?

Currently, you can find interest rates for boats between 4.39% and 7.69%. Essex financing lays out their current interest rates by term and cost in a super helpful chart, which you can view here.
 

Can I Deduct Boat Loan Interest?

You can only deduct boat loan interest if you claim your boat as a residence. To be considered a qualified residence by law, your boat needs to have a sleeping space, a toilet and cooking facilities. You can only deduct interest on a loan on two residences per person. For additional information, go here. 
 

Why Finance a Boat?

Let’s be honest – boats can get pricey. Financing puts your dream boat within reach since you can pay for the boat over a longer period of time with smaller monthly payments. Also, if you are interested in buying a larger boat like a long-range cruiser or trawler, you might be able to deduct the interest paid on the loan if you claim the boat as a second or primary home.
 

More Information on Financing and Loans

Your dream boat is in reach, as long as you do the proper research and ensure that your finances are in order. Check out our Ultimate Guide to Financing for more information. It will answer all your questions about industry lingo, credit scores, interest rates, trade-ins, down payments and so much more. If your credit is on the lower side, you can check out our guide to bad credit financing.
 

Conclusion

Boating is about escaping from the stress of daily life and enjoying the fun and relaxing offerings of the open waters. Don’t let your concerns about boat loans stop you from achieving your goals. Boat loans are an essential part of the boating industry and your boat sales representative should help you through the process. When you’re ready to buy, check at GoRollick.com to see available inventory and get special offers on your favorite boats.
 

GoRollick Buying Experience

When you’re ready to find your perfect boat, be sure to check us out at Gorollick.com.You can:

• See nationwide inventory, specs, and incentive information
• Get an upfront, transparent price on your desired boat
• Receive special offers on both the boat, as well as additional accessories
• Shop at one of our Certified Dealers who are committed to providing an exceptional buying experience