It is very common for prospective boat owners to borrow at least some of the money needed for the purchase. If you need a loan to buy a boat, there might be several different options available for you depending on the circumstances. Which one that suits you best will depend on various factors, including your financial situation and which boat you want to buy.

Dealer financing

It is common for boat dealers to work together with a lending company to help prospective buyers obtain boat financing. You will normally not need to visit the lender’s office – everything is taken care of at the boat dealer’s place of business. Typically, the boat will be used as collateral for this type of loan. A lien will be placed against the boat and, in most cases, the lender will require you to obtain and maintain a certain level of boat insurance.

Manufacturer financing

Some boat manufacturer have financing programs available to promote the sales of their products. Manufacturer financing is typically offered through the boat dealer, and you don’t have to visit the manufacturer’s place of business to apply and be approved for the loan. The boat is used as collateral for the loan, a lien is placed against the boat, and you are required to keep your boat sufficiently insured until your debt is paid back in full.

Personal loan from a bank or credit union

When buying from an individual rather than from a dealership, obtaining dealer financing isn’t possible and getting manufacturer financing is highly unusual. If your credit worthiness is good, you might be able to obtain a loan from a bank or credit union instead; a loan where you don’t have to use the boat as collateral at all. A private loan can also be the way to go in a situation where the boat isn’t desirable as collateral, e.g. because you are buying a fixer-upper.

Home equity

If the difference between the size of your home mortgage loan and the estimated market value of you house is large enough, you might be able to increase your home mortgage to obtain money for buying a boat. This is risky however, because failure to repay your home mortgage loan can result in foreclosure and eviction.

Always compare before you make a decisions

When you have set your eyes on a lovely boat at the local dealership, it can be tempting to simply sign whatever loan application that is put in front of you in order to secure the deal. This isn’t recommended however, since there is no guarantee that this is the best possible financing solution for you.

Always compare several different financing alternatives before making a decision, and try to see through the lofty sales-pitch-talk and calculate what the loan will actually cost you. There are for instance boat loans where you pay no interest during the first 2 years, but a rather heft interest thereafter. They can be a great choice for a disciplined consumer who will take advantage of the first two years to pay down the principal quicker than required, but they can simultaneously be a horrible choice for the person who just keep pushing the debt in front of them and end up making huge interest payments from year three and onward.

Here are a few examples of points that are important when comparing boat loans:

  • What is the total cost of the loan?
  • How quickly must I pay back the loan?
  • How large will the minimum monthly payments be?
  • What are the rules for paying off the loan in full before the loan term is over?
  • How large is the mandatory down payment, if any?