How to choose the best boat loan lender

Finding the best boat loan lender requires more than just searching for the lowest rates and fees. The type, age and use of the boat you want to finance may lead you to one lender over another. 

Knowing how different types of boat loans work can help you decide which offers the best repayment terms for your budget. Learning lenders’ requirements can also help you weed out lenders that don’t suit your credit or don’t finance the type of vessel you’ve set your sights on.  

Consider these factors before choosing the best boat loan lender

Before applying for a boat loan, weigh these seven factors.

1 . Secured or unsecured

A secured loan uses your boat as collateral in the same way that a car loan is secured by an auto. Rates and terms may be lower because the lender knows they can repossess the boat if you don’t repay the loan. However, the boat has to meet the lender’s requirements. And you may need to make a down payment.

Unsecured loans are a good option if you’re buying an older used boat or don’t qualify for dealer financing for the boat you want. The best boat loan lender may be a personal loan company since they can offer fast and easy financing and never require a down payment. 

Personal loan lenders offer loans as high as $100,000 with terms as long as seven years, giving you plenty of payment options. If the personal loan is unsecured, you don’t risk losing the boat if you default. One caveat: If you have bad credit, your APR could be as high as 36 percent.

2. Usage requirements

Some lenders may set rules about how boat loan funds are used. Companies focusing solely on secured boat and marine craft financing may be flexible about the type of new boat you finance.  

Secured boat lenders won’t approve certain boat models. Others may not allow you to finance boating-related costs, like marina fees, insurance or maintenance costs. They may also place restrictions on how you use the boat after it’s purchased — you might not be approved if you plan to rent the boat out, for example.

An unsecured personal loan makes more sense if you want to avoid restrictions on your boat’s use, age, or type. Your boat’s specifications are not vetted, and you can borrow extra to cover other boat-related costs secured lenders might not allow. 

3. Used boat restrictions

Some institutions or lenders may hesitate to finance a used boat with a secured loan. That’s because there’s more risk that older models may need more routine maintenance and upkeep, making them harder to resell if you default and the lender repossesses the boat. 

Lenders that offer used boat financing generally require a larger down payment or a higher annual percentage rate (APR) to offset those risks. You’ll also need to jump through more hoops for approval.

Boat financing may base their offer on a full inspection to ensure the vessel is in good condition.  If you want to skip all the used-boat inspection hassles, consider a personal loan to finance it instead.

4. What’s available at your local bank

The best boat finance company may be your local bank or credit union. You may be eligible for member benefits, like interest rate discounts, if you sign up for autopay or have another account with them.

Sticking with your bank could reduce application stresses, especially if you have a longstanding relationship there. Be sure to check for any boat age or use restrictions ahead of time. 

5. Rates and terms

The APRs on unsecured personal loans for boats may range from 7.5 percent to almost 36 percent, while secured boat loans may stay in the 9 to 12 percent range. New boat rates are usually lower than older boat APRs. 

Some unsecured lenders cater to excellent credit borrowers with rates that rival secured loans. You’ll also avoid the extra approval process for your boat and can borrow more than the boat price for extras you might need to get the vessel water-ready. 

You may also find longer terms (up to 20 years) at secured boat lenders, while many unsecured personal loan companies offer a maximum seven-year term. Secured used boat lending may also require a down payment for the best rate. 

Unsecured loan amounts are also capped at $100,000, so if you need more, you’ll need to choose a secured boat lender. Some luxury boat lenders may offer amounts of $250,000 or higher. 

Regardless of which type of loan you take out, always ask about interest rate discounts for enrolling in autopay (most offer discounts of between 0.25 percent and 0.50 percent).

6. Fees

Some lenders may charge application or origination fees on top of interest. That can significantly reduce the loan’s value, especially if you’re buying an expensive boat. 

Unsecured loan lenders deduct the fees from the loan proceeds when your loan funds. Make sure you borrow enough to cover them, or you’ll pay the difference out of pocket when you buy your boat. 

Before applying for a loan, shop for lenders offering low or no-fee options. You may have a more challenging time avoiding fees if you have fair or bad credit. 

7. Reputation

Always check out the consumer and industry ratings of any lender you’re considering. Before you apply, look for comments or post questions on boating forums about a particular lender. 

Watch for patterns in the reviews. For example, if you notice that many people have issues with customer service or difficulty getting their loans funded, you may want to keep shopping. 

Tips for finding the best boat loan lender

1. Decide between secured or unsecured options. The APRs, down payment, costs, and terms of each type of lender are very different. In general, secured loans are best for new expensive boats that require high loan amounts or long repayment terms. Unsecured loans are your best bet for used boats, especially if you need fast cash for a private party purchase.
2. Shop around: Finding the best place to get a boat loan often requires comparing offers from at least three boat lenders. Make sure you compare apples-to-apples loan types. If you want a secured loan, compare secured boat lender options or compare the offers of only unsecured personal loan lenders. Once you find a few suitable lenders, see if you prequalify before applying. Prequalification allows you to see your approval odds and predicted rates before applying without impacting your credit score.
3. Spruce up your credit score: The lowest boat loan rates go to borrowers with the highest credit scores. If your boat-buying plans are a few months away, consider paying down your credit card balances to boost your credit utilization ratio.
4. Check your debt-to-income ratio: Lenders measure your debt-to-income (DTI) ratio to determine how much of your monthly paycheck is used to pay debt like credit cards, car loans or mortgages. A high DTI ratio may result in a higher rate, lower loan amount or both.
5. Learn the lender requirements before applying: Your financial profile should meet the lenders’ boat qualification requirements. The requirements for a luxury boat loan may be stricter than for someone financing a used weekend warrior watercraft. Before applying, check the lender’s website for details about the minimum and maximum loan amounts, credit score minimums, repayment terms and any boat specifications (for secured loans).
6. Check the lender’s funding time: You should also know how quickly the lender funds loans, especially if you’re competing to buy a used boat and need the funds quickly.

Bottom line

Financing a boat can be a great way to buy your vessel and create those summer lake or seafaring memories. However, the monthly payment may be significantly higher or lower depending on whether you choose a secured or unsecured option. To minimize the amount of interest you pay, consider making a large down payment or sprucing up your credit by paying off your credit card balance months before you apply. Those simple steps could help you enjoy your water time without the stress of an unaffordable loan.