How to Get a Boat Loan

If you love spending time on the water and have made it your goal to own a boat one day, you may be trying to figure out how and when to buy your dream boat.

Buying a boat is exciting, but it can also be an expensive purchase and a long-term commitment. Taking out a boat loan could make it easier to finance your big purchase and get you on the water sooner.

If you’re planning to apply for a boat loan, keep reading to learn more about what exactly a boat loan is, different financing options and how to find the best loan for your situation, so you can enjoy the open water to the fullest.

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. With a personal loan, a lender sends you the money as a lump sum, and you pay it back in monthly installments for a set amount of time, including interest (the cost of borrowing). Loan terms vary depending on the lender, loan type and the cost of the boat, as well as your financial profile.

Boat loans can be secured or unsecured. With a secured loan, you'll need to provide collateral, which is something of value you possess, such as a car or boat. If you don’t repay your loan, the lender has the right to take possession of the collateral to recover the money you owe. Collateral can boost your borrowing power, potentially allowing you to qualify for a lower interest rate or longer loan term.

On the other hand, an unsecured loan doesn’t require any collateral. Instead, the lender typically considers factors like your credit score, credit history and income. OneMain offers both unsecured and secured personal loans. While other lenders may have different ways of evaluating applicants, OneMain looks at your whole financial picture to find a loan that works for you.

Where can you get a boat loan?

If you are looking to finance a boat purchase, you have a few options:

• Lenders: Some lenders, like OneMain, provide personal loans that you can use to buy a boat or cover a boat-related expense like a repair. In certain cases, lenders may call these types of loans “boat loans.” With a personal loan, you get a lump sum of money upfront and pay it back in predictable monthly installments with a fixed interest rate.
• Banks or credit unions: You can also get a personal loan from a bank or credit union. Banks may offer larger loans with stricter credit requirements than credit unions. A credit union may offer a lower interest rate and fewer fees than a bank, although you typically have to be a member to apply.¹
• Boat dealerships: In-house boat dealership or marine lender loans are often secured with collateral. You may be able to add on extras like insurance or boat service plans.²

6 steps to get a boat loan

In order to successfully get a boat loan, you’re likely to go through these six key steps.

1. Check your credit and finances

Lenders typically review your credit score, income and debt-to-income (DTI) ratio as part of deciding whether to approve you for a loan and if so, what terms they’ll offer.

Your credit score shows how likely you are to repay a loan given your history as a borrower. A favorable credit score could signal to a lender that you pay your debts on time. If you have less-than-perfect credit, you might be able to boost your borrowing power with a secured loan. Lenders may have less strict credit requirements for secured loans since they’re backed by collateral.

Your income is key because it shows a lender that you have the ability to repay the loan. Lenders want to see that you earn enough to make monthly loan payments.

Your DTI ratio measures 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. Having a low DTI ratio could show lenders that you’re able to manage your existing debt and able to take on more.

Before you apply for a loan, it’s a good idea to check your credit report so that you know where you stand and if there are any errors or instances of fraud that may be lowering your credit score. By law, you’re entitled to a free credit report from each of the three credit bureaus (Equifax, Experian and TransUnion) every 12 months, and the credit bureaus offer free weekly reports as well. You can access your credit reports at AnnualCreditReport.com. If you need to improve your credit score, it could take a few months or more depending on your financial situation.³

2. Set your boat budget

Beyond the sticker price of the boat, there are other costs to consider when setting your budget. Some things you might consider:

• Taxes: Taxes vary widely by state and the cost of your boat. Taxes are usually calculated as a percentage of the boat’s value, sometimes capped at a certain dollar amount.⁴ Depending on where you live, sales tax can be more than 8% of your boat’s purchase price.⁵
• Insurance: Insurance could be up to $500 a year for a small boat, and for a larger or higher-end boat, it may cost 1-5% of the boat’s value annually.⁶
• Docking: If you need to dock your boat at a marina, you usually pay by foot, so larger boats will cost more. Prices will also vary depending on where you’re located — you could pay as little as $5 per foot per month to dock at a smaller marina without ocean access, for instance.⁷ Slips in high-traffic coastal areas could $25 per foot or more.⁸

Particularly if this is your first time owning a boat, there may be other costs that you hadn’t considered — required supplies for your boat, like life preservers and a fire extinguisher, as well as accessories, such as waterproof speakers and fun cups for beverages.

To set up your budget, consider your other regular expenses and what you can afford to spend on monthly loan payments without stretching yourself too thin. If you don’t have a budget already, or if you need to revise your budget, add up all your monthly costs and compare them to your monthly income.

3. Compare loan options

If you aren’t sure which loan is right for you, prequalifying for a few different boat loans could give you a better sense of the offers you may be approved for, if they fit within your budget and whether you’ll be able to finance the boat you want.

Another benefit of prequalifying is that it won’t affect your credit score. Applying for a loan can cause a small, temporary dip in your credit score because it involves a hard credit inquiry. Prequalifying, on the other hand, involves a soft inquiry and doesn’t impact your credit score at all.

4. Gather your documents

Before you apply for a boat loan, you’ll need to pull together important documents as part of your application. Lenders may have different requirements, but you may need:

• Your driver’s license, state ID or passport
• Proof of income through recent pay stubs, W-2s or tax returns
• Proof of residence

In some cases, you may be able to make copies of these documents or upload digital scans as part of your application.⁹ Lender policies may differ, so be sure to check the requirements first.

5. Apply for the loan

You can generally apply for a loan online, by phone or in person, depending on the lender. Once you submit your application and the lender begins their review, pulling your credit report will trigger a hard credit check, so you may notice your credit score goes down by a few points.

The decision timeline depends on the lender and your application. With a OneMain boat loan, you could receive an answer within one day, although timing depends on whether your loan is secured or unsecured, among other factors.

6. Complete the purchase

If you’re approved for the loan, you’ll receive your funds. Different lenders may have different funding options, but at OneMain, you may get the money via direct deposit, debit card transfer or paper check. Timing also varies by lender and funding option, but often you can receive the funds within a few days, if not the same day. If you’re approved for a OneMain boat loan, you could get funds as fast as one hour after loan signing by having the funds transferred to your bank-issued debit card.^†

Once you have the money in hand, you can complete the purchase of your boat.

Finalize the details

After you’ve purchased your boat, you’ll want to take steps to register the vessel with your local Department of Motor Vehicles (DMV), pay the registration fee and secure a title and registration sticker to display on your boat. Requirements vary from state to state, but most states require you to take a boating education course before you can operate your boat.¹⁰

There are only a few states where you legally need boat insurance before you set sail, but your marina, lender or both may require you to have it.¹¹ In any case, insurance is a smart choice to make sure your passengers, your boat and other boaters are protected before you hit the water.

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Set sail with the right loan

Financing can make boat ownership more accessible, but choosing the right loan and staying within your budget can help you have a stress-free experience.

Before you apply, understand how boat loans work, learn about different types of financing, and figure out what kind of loan will work best for you. Soon, you’ll be one step closer to enjoying the water.

Sources:

1: https://www.investopedia.com/banks-credit-unions-best-for-personal-loan-7570430
2: https://www.bankrate.com/loans/personal-loans/how-boat-loans-work/
3: https://www.equifax.com/personal/education/credit/score/articles/-/learn/raise-credit-scores-fast
4, 5: https://rnmarine.com/news/salestaxrates
6: https://www.ramseysolutions.com/insurance/boat-insurance-cost-guide
7, 8: https://blog.getboat.com/travel-tips-advice/boat-docking-costs-explained/
9: https://www.bankrate.com/loans/personal-loans/how-to-finance-a-boat/
10: https://uscgboating.org/regulations/state-boating-laws-details.php?id=4&title[2.1]Boating%20Education%20Requirements
11: https://www.progressive.com/answers/state-boat-insurance-requirements/