Buying a boat is an exciting moment, but it’s also a big investment. Like a car or house, getting a vessel of your own comes with a sizable price tag.
Depending on the type of boat that you’re looking for and how much cash you’ve saved, you may need to take out a boat loan to fund your new purchase. If you’ve never financed a boat before, we’re here to tell you everything that you need to know about financing a boat.
Know what type of boat you want
The first place to start is to know what kind of boat you’re after. Before you head into a bank and ask for a boat loan, you need to know the price range of the boats that you’re looking at. If you’re unsure what type of boat works best for you, here’s what to look for when buying a new boat. If bay boats are your preference, here are some things to help you find the best bay boat.
The cost of something like a 24-foot hybrid bay boat is going to look very different to a 33 CSF offshore fishing boat, decked out with all the bells and whistles! Keep your specifications in mind as you start to work out what you can realistically afford to purchase.
Determine your budget
Figuring out how to finance a boat comes down to being organized and methodical with your numbers. The first place to start is to decide how much you can afford to put down towards your boat.
Most dealers require at least 10% to 20% in cash, with the rest funded by your boat loan. The bigger your down payment, the lower your monthly loan repayments will be. Think about the size of the monthly payment that you’re comfortable with and use a loan calculator to estimate what these will be before you sign on the dotted line.
Your loan should never exceed more than 20% of your income and there are other factors to consider when it comes to boat ownership. Maintenance, marine fees, and boat insurance all cost money. Consider building a savings plan into your budget to put more down before you buy your boat and to cover any anticipated or unexpected fees that may come up.
Where to finance a boat
You have a budget in place and are ready to move ahead with your boat loan, but where do you go to finance a boat? Boat dealers are the most common option for new boat owners. They have plenty of experience setting up loans for you and can make the process much easier than navigating it alone.
If you already have a lender in mind, you can approach the bank directly and ask for a boat or recreational vehicle loan. Even if they don’t have a loan type dedicated to this, you have other options. Personal loans, home equity loans, and even home loan refinancing can all give you the funds you need to buy your new boat.
Finally, you could look at lenders who specialize in marine financing. This is typically the route that people take if they’re unable to get dealer financing and their bank can’t help them. The National Marine Lenders Association offers plenty of information to help you find the right lender for your purchase.
Get pre-approved for boat financing
Much like buying a house, many lenders will offer pre-approval options to get the process started quickly. Once you know your budget and the type of boat you’re looking for, you’re in a good position to find out how much you can borrow and take care of the necessary paperwork.
To get pre-approved for a boat loan, you’ll need to provide your lender with some financial documentation. A recent tax return that shows proof of income and a favorable debt-to-income ratio is essential, as is an excellent credit score. Most lenders prefer a score over 700, but the upper 600s should still be fine if you’re comfortable with a slightly higher interest rate.
You may be asked to provide other financial paperwork like mortgage documents or bank statements to prove that you’re in good financial standing and can afford the repayments on your boat loan.
How do boat loans work?
Most boat loans are installment, fixed-term loans. This means that you’ll have a set monthly payment for the length of your loan. Boat loans are typically longer than car loans, and can be anywhere up to 20 years, depending on your lender.
Fixed-rate loans also mean that your interest rate will stay the same throughout the lifetime of your loan. There are some variable rate boat loans on the market. But it’s important to understand that, while these may look cheaper initially, the interest rate can fluctuate over the years of your loan.
Applying for a boat loan
If you’re able to have a choice in lenders, get multiple quotes to find the best interest rate. You may find rates as low as 4-6% APR. What you’re offered will depend on your credit score, income, the size of the loan, and even the type of boat you’re buying. Like cars, boats depreciate in value, so this can impact your interest rate.
The application process is similar to pre-approval, but you’ll need even more documentation to provide the lender with a thorough look into your finances. There will likely be application fees to consider as well.
Most buyers will hear back from lenders within a week of their application being submitted. If you’re taking out a loan through a dealer, you’ll need to bring your down payment with you when you meet with them. It’s very possible that, if your finances are in order, you could close on your loan that day and walk out with your new boat.
Obtain boat insurance
While you’re waiting for your loan application to go through, you should be taking the time to look at different types of boat insurance. Lenders will often need you to have this in place before they offer you financing (much like a car), so it’s important to have this setup and ready to go.
Get Out On The Water In Your Brand New Boat
Even if you have the money to pay cash for a boat, financing may still be a good option to consider. It can help you to maintain financial stability and keep your cash liquid, all for a set monthly repayment amount.
From the 26 HCO offshore fishing boat to hybrid offshore boats like the 26HBW that are perfect for cruising with your family, Crevalle Boats can make your dreams of boat ownership come true. Find a dealer and the boat you’ve always wanted or start customizing your dream vessel today.