How to Finance Your Dream Boat with Boat Loans and Financing

financing-a-boat

It's exciting to shop for the boat of your dreams. However, if you decide to finance the boat, you will need to find a lender in order to obtain the right boat loan. Although shopping for boat financing options is not as fun as buying a boat, it's an essential part of the process. 

Before you begin searching for the perfect boat, it is important to have a solid understanding of boat financing and your options. Although you don't have to be an expert in boat finance, it is important to understand what you can expect from the process.

What are the requirements to be eligible for a boat loan?

You must prove to the lender that your financial ability to repay the boat loan you are applying for. Your credit score is the most important thing banks consider. Therefore, it is crucial that you check your credit rating at major bureaus like Experian and Equifax. Your chances of getting a loan may be limited if your credit score is below 700. However, a score over 750 could lead to higher interest rates and greater loan limits.

First, get your credit score in shape

It is important that you check your credit score before the bank does. This is why: It's easier to fix any problems or inaccuracies before applying for a loan.

Make sure that there aren't any closed accounts being reported as open. Close any accounts you don’t use anymore. You can prevent problems from developing by checking your credit reports first. Subprime financing is available to those with lower credit scores. However, national lenders will require that credit scores be at least 680. Make sure you have everything in order before you start. You can also hire a third-party to repair your credit or challenge or remove items from you history.

Second: Know Your Debt-To Income Ratio

Banks also consider your debt-to income ratio. This is calculated by dividing your monthly payments by your monthly earnings. Lenders prefer a ratio of 40 to 45 percent for your debt-to-income ratio, which includes payment on the boat loan.

Lenders will also look at your net worth, liquidity and assets. Your net worth is the sum of your assets and liabilities. This includes any properties you own, as well as any debts. Anything that can be converted into cash in 30 days or less is a liquid asset.

Third: Payment History

The eligibility criteria for a boat loan will also be affected by your payment history. Lenders may not approve your loan application if you have a history of late payments, even if your credit score has been good. Your payment history is a record of how you have managed your credit accounts over the years. This information can be crucial because it can account for 35% of your credit score and is a key factor in the calculation. Research has shown that your payment history is an indicator of your ability to repay future debts. Lenders care primarily about your past history of defaulting or repaying loans. As long as your credit history is good, late payments will not have a significant impact on your score. However, being able to pay on time does not guarantee you a perfect score. It is just one factor that will be considered when calculating your FICO Scores.

Fourth: Significantly, Home Mortgages Can Help

Many boat financing lenders will also look at whether you own a home and are current on your mortgage payments. Lenders prefer people who have owned homes previously and can afford large amounts of loans. The home mortgage should be significantly more than the boat value. Lenders will not approve large sum loans for those who don't own homes or have proven they can afford substantial sums of money.

Boat down payments and ownership costs

"Obviously, if your application for a loan boat, you must be able show that you have enough money to make the down payment, but also that you can pay the costs of boat ownership - slip fees, fuel, and all that stuff," stated David Mann, the membership program manager at Boat U.S., a boat owner association that connects buyers and lenders.

Boat down payments typically range between 10-20%, but this will depend on the boat's cost and your location as well as your finances.

Boat loan interest rates

Your credit score, payment history, term, boat age, and other factors will all affect the rate of your boat loan. A boat that is slightly older may have a lower interest rate. Loans with shorter terms typically have higher interest rates that loans with longer terms. Remember that interest rates can vary depending on credit history.

"First, do your research. Mann stated that there is a lot of difference between lenders in marine lending. Mann said that although an individual may have a relationship to a local credit union, they might not be familiar with boats. However, they can provide boat financing as they also do motorbike and car loans. It can be easier and quicker to work with local credit unions or banks, but your loan terms could be shorter. National lenders will finance boats in all 50 US states, and often have a thorough understanding of boats. Their underwriting process may be more stringent.

The purchase price, financing amount and details of your application, including credit score and payment history, can all impact the interest rate on a boat loan. They typically range from 5% to as high as 18-20% at the higher end. The average boat loan interest rate for 2023 is between 7% and 10%.

Steps in the Boat Financing Process

The process of purchasing a new boat and applying for a loan boat boat can overlap. These are the basics:

  • Learn about your financial capabilities and credit rating. You can check your credit report with major credit bureaus to find any errors and make corrections.
  • Ask around for local information and search online to see what other boat lenders have to offer. Boat financing is different from financing a car. You can't just walk into a dealership and get a brand new or used vehicle in a matter of hours. If the lender needs a report from a maritime surveyor, boat financing may take longer.
  • Be prepared to submit tax returns and bank statements to prove your ability to repay the loan. To speed up the review process, be prepared to submit these materials.
  • Pay attention to restrictions on use. You can't live on your boat if you are planning to charter it, or use it as a fishing guide, or for international cruises. Tell the lender. Some lenders won't lend money to a boat that is used for these purposes.


Other Things To Consider 

How to Get a Accurate Boat Value For Loan Purposes

It's true that forewarned is better than sorry. It is true, and it's a smart idea to find out what used boats are worth. You can get the same information that boat lenders have about boat values.

There are many sources that can help you research boat prices and values, just like credit reporting agencies. These resources will also allow you to determine the boat's value, which can be very useful for negotiating a fair trade-in price or resale.

For boat loans to be secured, it is important to do your research thoroughly and to be prepared.

Lenders take into account the boat's age and its value. For example, a brand new boat and a 3-year-old boat will not have the same rates or terms. These lenders will usually require a down payment of between 10 and 15 percent, as they are evaluating the boat's value.

Check out the current boat loan rates

To find out what your monthly boat loan payment and rate could be, you can use the Boat Payment Calculator provided by Trident Funding.

Here are some examples of monthly boat loans payments:

Loan: $15,000
10% down payment
APR: 6.79%
Example payment schedule: 144 monthly installments of $135

Loan: $30,000
15% down payment
APR: 7.25%
Example payment schedule: 180 monthly payments starting at $273.86

Loan: $65,000
15% down payment
APR: 5.50%
Example payment schedule: 180 monthly installments of $531.10

Loan: $200,000
Down payment: 15%
APR: 4.99%
Example payment schedule: 240 monthly installments of $1,318.81


Frequently Asked Questions (FAQs)

What is the process of a boat loan?

The amount of a boat loan depends on the terms of the loan, the interest rate, and the principle. In general, smaller loans with shorter terms typically have higher interest rates that larger loans with longer terms. Higher credit scores can help you lower your interest rates.

What information do I need to apply in order to finance a boat?

Bank statements and tax returns will be required to prove income. Banks will also consider your credit rating and your debt-to income ratio, net worth, liquidity, and other factors.

How can I figure out how much I can afford to spend?

You can get help from banks to determine this, but you can also use our Boat Loan Payment Calculator provided by Trident Funding to make a decision about a payment that you feel comfortable with.

What credit score is required to get a boat loan?

Higher credit scores are better as you can get loans with lower interest rates if your credit score is higher. Although there are subprime lenders, most major lenders prefer credit scores above 680.

What is the average length of boat loan repayments?

The terms of your loan will vary depending on the amount and your ability to repay. However, you can expect to be able to borrow between 24 and 48 months for boats that are trailerable and up to 240 years for larger vessels.


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