Don’t sink your finances — consider these factors before getting a boat loan

Americans spend over $35 billion annually on boats, marine products and services — it’s safe to say we love boating. But owning a boat is an expensive endeavor. Beyond the sticker price, there are maintenance costs, insurance and other extras that can set you back by several thousand dollars or more a year. Buying a boat can be a fun investment, but consider these factors before applying for a boat loan.

5 factors to consider before applying for a boat loan

When it comes to purchasing a boat, financing is usually the way to go, but there are a few considerations to weigh before applying for a boat loan.

1. Your credit

Most boat loans are issued based on your credit history. The higher your credit score, the better your chances of getting approved for the loan.

Your credit score also plays a key role in determining how much interest you’ll pay. Although some lenders may approve you for a loan with bad credit, you’ll have a higher interest rate and pay more for the loan.

Be sure to check your credit score and review credit reports to see where you stand. You can request a free copy of your credit report from all three major bureaus by visiting AnnualCreditReport.com.

These reports show you where you stand with creditors and can help you determine whether you need to build your credit before applying for a loan.

2. Your budget

As with any big purchase, ensuring that your future boat loan payment fits into your monthly budget is important. Take the time to inventory your debts, minimum payment dues and other financial obligations to understand how much boat you can afford.

Depending on the lender, you may be asked to make a down payment of between 10 and 30 percent of the total loan amount. This is more common with secured loans — unsecured loans typically don’t require a down payment, though your interest rate will be higher.

To better understand how the cost of a boat fits into your budget, use a boat loan calculator.

How much does a boat cost?

The average cost of a boat was $174,000 in 2024. Basic models are certainly available for less, but luxury models like yachts can cost millions of dollars.

3. Other costs associated with owning a boat

This shouldn’t come as a surprise, but the cost of the boat itself is just part of the equation. Yearly boat maintenance costs are typically equal to 10 percent of the total cost of the boat. So, if you have a $40,000 boat, you can expect to pay about $4,000 a year in maintenance.

Don’t forget to factor in the cost of insurance. Boat insurance rates are usually about 1 to 5 percent of the boat’s insured value.

Other costs to factor in include:

• Fuel
• Dock or marina fees
• Storage fees
• Taxes
• Registration
• Boating license fees

4. The type of loan you’ll need

Boat loans can be secured or unsecured. With a secured loan, an asset is required to serve as collateral — in this case, your boat. Unsecured loans, on the other hand, don’t require any collateral and are issued based almost entirely on credit.

If your credit needs work, a secured loan may be the better option. Secured loans tend to be easier to qualify for and offer lower interest rates than unsecured loans. However, if you default on the loan, you could lose the boat or any other asset that was used as collateral.

Unsecured boat loans are personal loans used to buy a boat. They suit those with good-to-excellent credit and strong finances — or those who have a cosigner that meets these criteria. If you fall behind on payments with an unsecured loan, the lender can’t seize any assets from you unless they take you to court. However, your credit will still be affected by the default.

5. How often you’ll use the boat

According to the U.S. Coast Guard, the average boat is only used 54 days a year. If you’re thinking about using your boat occasionally during Spring Break or summertime, taking on thousands of dollars worth of debt may not be worth it.

You may be better off renting a boat for specific occasions. Although renting isn’t cheap, it will save you money on insurance costs, maintenance and other fees.

How to qualify for a boat loan

Just like any other loan, you’ll need to meet the lender’s eligibility criteria. However, it may be harder to qualify for a boat loan than other types of loans — a boat is considered a luxury item, so lenders take on a greater risk in financing them. After all, if a borrower encounters financial hardship, they are more likely to stop repaying a boat loan than a necessity like a mortgage.

As such, eligibility standards may be higher for boat loans than on other types of financing. In addition to meeting financial and credit criteria, your boat may need to meet age and condition requirements.

To get approved for most boat loans, you’ll likely need:

• Good-to-excellent credit
• Reliable income
• A low debt-to-income (DTI) ratio

Shop around for lenders before applying for a loan. To find the most favorable terms and lowest rates, get prequalified with at least three lenders before making a choice.

Should you get a boat loan?

While buying a boat can be appealing, keep in mind that it is a depreciating asset — like a new car, your boat begins to lose value the moment you set sail. It may not be wise to go into debt for an investment that is bound to lose money, especially if you only plan to hit the water occasionally. To avoid the high monthly cost of your boat purchase and the additional costs of upkeep and storage, consider alternatives like rental or boat share memberships.

But if you’ve decided that boat ownership is right for you, there’s some work you can do to get the best deal. Take some time ahead of your purchase to tighten up your credit score and shop around with different lenders. These small moves can result in monthly savings that really add up over the life of the loan.

Bottom line

When deciding to buy a boat, weigh your finances and budget against the total cost of owning a boat. Once you know how much you can afford, find loan options that suit your budget. Boats can be an expensive investment but also a great way to spend warm days. Doing your research can be well worth it before getting out on the water.