How Long Can You Finance a Boat?
Summary
Boat loan terms be as long as to 20 years, depending on the lender and type of loan. Learn how long you can finance a boat and what factors affect your loan term.
In this article:
If you’ve dreamed of owning a boat for years, or you’ve just relocated to live near the water and want to buy a boat for your family to enjoy, it’s important to understand how boat loans work.
It’s a good idea to research loan types and terms when you apply for any kind of financing, but especially for an expensive purchase like a boat, which is a significant long-term commitment. Most lenders offer boat loans with repayment terms up to 15 years, although it’s possible to find terms up to 20 years if you’re purchasing a more expensive vessel.1
If you’re interested in taking out a boat loan, this article explains common boat loan terms and the factors that affect them. By learning about boat loans now, you can explore the right type of lender for your budget and make the most of your time on the water.
What is a boat loan?
A boat loan is a personal loan that can be used to buy a boat or fund almost any boat-related expense. For example, you can use boat loans for covering mooring or funding slip fees, as well as for related boat maintenance and repairs.
How do boat loan terms work?
A boat loan term — or the length of the loan — can vary depending on factors like the lender, the size of the loan and the borrower’s credit history and income. When comparing loan offers, keep some important considerations in mind. For example, the longer the loan term, the more affordable your monthly payments may be because the total cost is spread out over a longer period. However, having a longer loan term often means you pay more interest — the cost of borrowing money. With a shorter loan term, you may have higher monthly payments, but you could save interest over the life of the loan.
Another important consideration is whether your boat loan will be secured or unsecured. With a secured loan, you'll need to provide collateral, which is something of value you possess. For a boat loan, the boat could be used as collateral. If you don’t repay your loan, the lender has the right to take possession of the collateral to recover the money they are owed. You may be able to get a secured loan for a lower interest rate, a longer term or a larger amount because the collateral makes the loan less risky for the lender.
An unsecured loan doesn’t require any collateral. Instead, the lender will typically consider factors like your credit score, credit history, and income. Unsecured boat loans may have shorter terms than secured boat loans — typically around seven years.2
Where to get a boat loan
If you’re looking to finance a boat, you have several options.
Lenders
Some lenders, like OneMain, offer personal loans that you can use to buy a boat or cover a boat-related expense, such as a repair. In some cases, lenders may call these types of personal loans “boat loans.”
With a personal loan, you get a lump sum of money up front and pay it back in predictable monthly installments with a fixed interest rate. OneMain offers both unsecured and secured personal loans.
Banks or credit unions
A bank or credit union may also offer a personal loan that can be used to finance a boat. You could be approved for a larger loan with a bank, although they may have stricter credit score requirements. As a member of a credit union, you may be able to get a loan at a lower interest rate and with fewer fees.3
Boat dealerships
You could also look into a loan from a boat dealership, which is typically secured with collateral. Dealerships may offer a larger loan amount or recommend the purchase of add-ons like insurance or service plans.4
Factors that affect the term of your boat loan
A number of things could affect whether your loan should have a shorter or longer repayment term. Here are some common items to consider:
The lender
Different lenders set their own maximum and minimum loan terms. As a result, your loan term may vary depending on which lender you end up choosing. For instance, OneMain loan terms range from 24-60 months.†
Your credit score and income
Your credit score and income play a role in the loan term a lender may offer you. A lender will assess your income and your credit score, which is a measure of creditworthiness based on your history as a borrower. A higher credit score shows you’re likely to be managing your existing debts well. For borrowers with less-than-perfect credit, qualifying for a shorter-term, secured loan may be easier.
Having a low debt-to-income (DTI) ratio is also important, because it shows how much of your monthly income goes toward your monthly debt payments. Lenders use DTI to assess your ability to repay a loan and the risk associated with extending a loan to you. A low DTI ratio demonstrates to a lender that you can manage your money and will be able to pay back new debts, which may allow you to qualify for a longer loan term.
Lenders may have different ways of assessing whether you qualify for a loan. OneMain works with a wide range of credit scores and takes your entire financial picture into account to find a loan that’s right for you.
The type of boat you choose
The type of boat you choose to purchase could affect your loan term. A high-end sailboat might be treated differently than a speedboat, for example, and could lead to a secured loan with a longer term.5
The size of your boat
The size of your boat could also determine the length of your loan term. For example, a large fishing boat will likely be more expensive to purchase and care for than a small motorboat. The fishing boat may require a more substantial down payment and a 20-year secured loan, while the motorboat could be approved for a shorter unsecured loan if you have a favorable credit history.6
Whether your boat is used or new
If you buy a new boat, you may qualify for a longer loan term. With a used boat, on the other hand, you may be offered a shorter term with higher monthly payments.7 Lenders may see used boats as a higher risk due to the age of the vessel.8
The price of your boat
The price of your boat could also determine the term of your loan. With a more expensive boat, your lender may be willing to extend the financing term over a longer period to help you afford the monthly payments.
How to choose the right loan term for your budget
In order to choose the right loan and its term for your budget, you’ll want to carefully consider several factors, including:
- Your monthly budget: What can you comfortably afford to spend on a loan each month? To start, add up all your monthly costs, including household utilities, groceries, mortgage or car payments and savings. Compare your monthly expenses to your monthly income. How much could you put toward a new loan without overextending yourself?
- The total loan cost: You’ll also want to think through the tradeoff between the size of your monthly loan payment and the amount of interest you’ll pay over the life of the loan. For example, if a smaller monthly payment makes a loan more affordable in the short term, you’ll need to decide if it’s worth paying more interest over the long term.
- Additional expenses: As you look at your budget, don’t forget about the other costs that come with a boat. Insurance, maintenance, docking, storage and fuel can add up quickly. You’ll probably also need to purchase some supplies for your boat, like life preservers and a first aid kit, and you may want to buy fun items like towels, a cooler and a portable speaker for music.
One way to figure out which loan is right for you is to shop around and prequalify for a few different boat loans. While applying for a loan can cause a small, temporary dip in your credit score, prequalifying doesn’t. Prequalifying can give you a better sense of the potential loan offers you might receive and how they could fit into your budget if you’re approved.
Borrow smart and enjoy the water
While financing a boat for up to 20 years is possible, the right loan term depends on your budget, financial goals and comfort with monthly payments. Carefully compare lenders and loan types before you make a final decision, and make sure you’ve considered how much you’ll spend on interest over the life of the loan, as well as on maintenance and upkeep.
Making a smart financial decision when it comes to a boat loan will give you some peace of mind so that you can enjoy your boat and the open water to the fullest.
Sources
1,2,4: https://www.bankrate.com/loans/personal-loans/how-q%20boat-%20loans-work/
3: https://www.investopedia.com/banks-credit-unions-best-for-personal-loan-7570430
5,6,7: https://www.boattrader.com/research/how-long-can-you-finance-a-boat/
8: https://www.discoverboating.com/buying/boat-financing/how-long-can-you-finance
This article is for general education and informational purposes, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any purpose and is not intended to be and does not constitute financial, legal, tax, or any other advice. Parties (other than sponsored partners of OneMain Financial (OMF)) referenced in the article are not sponsors of, do not endorse, and are not otherwise affiliated with OMF.
